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Rationing in a Durable Goods Monopoly

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Author Info
Vincenzo Denicolo'
Paolo Garella

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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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File URL: http://links.jstor.org/sici?sici=0741-6261%28199921%2930%3A1%3C44%3ARIADGM%3E2.0.CO%3B2-U&origin=repec
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Publisher 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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  1. Ari Hyytinen & Lotta Väänänen, 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. [Downloadable!]
  2. Di Maria, Corrado & Köttl, Johannes, 2002. "Lagged Network Externalities and Rationing in a Software Monopoly," Economics Series 120, Institute for Advanced Studies. [Downloadable!]
  3. Paulo Maçãs Nunes, 2006. "The Coase problem: a transformation of the usual utility function," Applied Economics Letters, Taylor and Francis Journals, vol. 13(7), pages 427-429, June. [Downloadable!] (restricted)
  4. Volker Nocke & Martin Peitz, 2003. "Monopoly Pricing under Demand Uncertainty: Final Sales versus Introductory Offers," PIER Working Paper Archive 03-002, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
    Other versions:
  5. V. Denicolo' & P. Garella, 1996. "Bargaining with Noisy Communication," Working Papers 271, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
Statistics
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