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Rationing in a Durable Goods Monopoly

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  • Vincenzo Denicolo'
  • Paolo Garella

Abstract

We 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 Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 30 (1999)
Issue (Month): 1 (Spring)
Pages: 44-55

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Handle: RePEc:rje:randje:v:30:y:1999:i:spring:p:44-55

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Cited by:
  1. Hyytinen, Ari & Väänänen, Lotta, 2004. "Could Mr. and Mrs. Capital Market Imperfection Please Step Forward? An Empirical Analysis of Adverse Selection and Moral Hazard in Capital Markets," Discussion Papers 887, The Research Institute of the Finnish Economy.
  2. Xu, Frances Zhiyun, 2011. "Optimal best-price policy," International Journal of Industrial Organization, Elsevier, vol. 29(5), pages 628-643, September.
  3. Nick Vikander, 2011. "Capacity Constraints and Beliefs about Demand," Tinbergen Institute Discussion Papers 11-015/1, Tinbergen Institute.
  4. Jeremy Bulow & Paul Klemperer, 2002. "Prices and the Winner's Curse," RAND Journal of Economics, The RAND Corporation, vol. 33(1), pages 1-21, Spring.
  5. Jeong-Yoo Kim, 2002. "Rationing as a Signal," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 1(2), pages 115-122, August.
  6. Ting Liu & Pasquale Schiraldi, 2012. "Buying frenzies in durable-goods markets," Department of Economics Working Papers 12-07, Stony Brook University, Department of Economics.
  7. Garella, Paolo G., 2002. "Price discrimination and the location choice of a durable goods monopoly," Regional Science and Urban Economics, Elsevier, vol. 32(6), pages 765-773, November.
  8. Volker Nocke & Martin Peitz, 2004. "Monopoly Pricing under Demand Uncertainty: Final Sales versus Introductory Offers," PIER Working Paper Archive 04-027, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  9. Nick Vikander, 2014. "Sellouts, Beliefs, and Bandwagon Behavior," Discussion Papers 14-15, University of Copenhagen. Department of Economics.
  10. repec:clg:wpaper:2012-07 is not listed on IDEAS

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