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Product Innovation by a Durable-Good Monpoly

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Author Info
Arthur Fishman
Rafael Rob

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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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Publisher 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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  1. Michael Waldman, 2004. "Antitrust Perspectives for Durable-Goods Markets," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Michele Boldrin & David K Levine, 2002. "Perfectly Competitive Innovation," Levine's Working Paper Archive 625018000000000192, David K. Levine. [Downloadable!]
    Other versions:
  3. Jay Pil Choi, 2001. "Planned Obsolescence As A Signal Of Quality," International Economic Journal, Korean International Economic Association, vol. 15(4), pages 59-79, December. [Downloadable!] (restricted)
  4. Qiu_Hong Wang & Kai-Lung Hui, 2005. "Technology Timing and Pricing In the Presence of an Installed Base," Industrial Organization 0512013, EconWPA. [Downloadable!]
  5. Kaiser, Ulrich, 2001. "Product innovation and product innovation marketing : theory and microeconometric evidence," ZEW Discussion Papers 01-31, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  6. Dmitriy Stolyarov & Ennio Stacchetti, 2004. "Obsolescence of Durable Goods and Optimal Consumption," Econometric Society 2004 Latin American Meetings 312, Econometric Society. [Downloadable!]
    Other versions:
  7. Calvano, Emilio, 2006. "Destructive Creation," Working Paper Series in Economics and Finance 653, Stockholm School of Economics, revised 18 Jul 2007. [Downloadable!]
  8. Eduardo Correia de Souza & Jorge Chami Batista, 2007. "Replacement Cycles, Income Distribution, And Dynamic Price Discrimination," Anais do XXXV Encontro Nacional de Economia [Proceedings of the 35th Brazilian Economics Meeting] 019, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
  9. repec:bep:revmkt:1:2003:1:1001-1001 is not listed on IDEAS
  10. Kai-Lung Hui & Qiu-Hong Wang, 2005. "Delayed Product Introduction," Industrial Organization 0503011, EconWPA. [Downloadable!]
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This page was last updated on 2009-11-13.


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