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Product Innovation by a Durable-Good Monpoly

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  • Arthur Fishman
  • Rafael Rob

Abstract

We consider a durable-good monopolist that periodically introduces new models, each new model representing an improvement upon its predecessor. We show that if the monopolist is able neither to exercise planned obsolescence (i.e., artificially shorten the lift of its products) nor to give discounts to repeat customers, the rate of product introductions is too slow -- in comparison with the social optimum. On the other hand, if the monopolist is able to artificially shorten the durability of its products or to offer price discounts to repeat customers, it can raise its profit and, at the same time, implement the social optimum.

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Bibliographic Info

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

Volume (Year): 31 (2000)
Issue (Month): 2 (Summer)
Pages: 237-252

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Handle: RePEc:rje:randje:v:31:y:2000:i:summer:p:237-252

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Cited by:
  1. Choi Jay Pil, 2001. "Planned Obsolescence As A Signal of Quality," International Economic Journal, Taylor & Francis Journals, vol. 15(4), pages 59-79.
  2. Boldrin, Michele & Levine, David K., 2005. "Innováció - a verseny szemszögéből
    [Innovation: the competitive view]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(6), pages 537-555.
  3. Michael Waldman, 2004. "Antitrust Perspectives for Durable-Goods Markets," CESifo Working Paper Series 1306, CESifo Group Munich.
  4. Sebastian Benz & Mario Larch & Markus Zimmer, 2014. "The Structure of the German Economy," Ifo Working Paper Series Ifo Working Paper No. 180, Ifo Institute for Economic Research at the University of Munich.
  5. Jong-Hee Hahn & Jin-Hyuk Kim, 2012. "Monopoly R&D and Compatibility Decisions in Network Industries," Working papers 2012rwp-43, Yonsei University, Yonsei Economics Research Institute.
  6. Caminal, Ramon, 2012. "Dynamic Product Diversity," CEPR Discussion Papers 8990, C.E.P.R. Discussion Papers.
  7. Ramon Caminal, 2011. "Dynamic Product Diversity," Working Papers 594, Barcelona Graduate School of Economics.
  8. Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
  9. Souza, Eduardo Correia de & Batista, Jorge Chami, 2014. "Replacement Cycles, Income Distribution, and Dynamic Price Discrimination," Insper Working Papers wpe_331, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  10. Calvano, Emilio, 2006. "Destructive Creation," Working Paper Series in Economics and Finance 653, Stockholm School of Economics, revised 18 Jul 2007.
  11. Eric BROUILLAT (GREThA, CNRS, UMR 5113), 2011. "Durability of consumption goods and market competition: an agent-based modelling," Cahiers du GREThA 2011-31, Groupe de Recherche en Economie Théorique et Appliquée.
  12. Athanasopoulos, Thanos, 2013. "Efficient Upgrading in Network Goods : Is Commitment Always Good?," The Warwick Economics Research Paper Series (TWERPS) 1006, University of Warwick, Department of Economics.
  13. Jiri Strelicky & Kresimir Zigic, 2013. "Software Upgrades under Monopoly," CERGE-EI Working Papers wp478, The Center for Economic Research and Graduate Education - Economic Institute, Prague.

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