Rationing in a Durable Goods Monopoly
AbstractWe offer a new explanation of equilibrium rationing. As is well known, a monopolist selling a durable good and not able to commit to a price sequence has an incentive to lower the price once the consumers with the greatest willingness to pay have bought, but this induces consumers to postpone purchases. We show that rationing reduces the incentive to lower future prices and may allow the monopolist to increase his discounted profit.
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Bibliographic InfoArticle provided by The RAND Corporation in its journal RAND Journal of Economics.
Volume (Year): 30 (1999)
Issue (Month): 1 (Spring)
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