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The optimal suppression of a low-cost technology by a durable-good monopoly

Author

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  • Karp, Larry S.
  • Perloff, Jeffrey M.

Abstract

If a durable-good monopoly can use either of two technologies whose properties are known to consumers, the monopoly uses only the technology with the lowest average cost at low levels of production. If consumers only know about technologies in use, the monopoly may use an inferior technology initially to increase its profits, keeping the new, efficient technology secret and switching later. Thus, in either case, an inferior technology may be used; however, switching between technologies occurs only if consumers are not fully informed about both technologies.

Suggested Citation

  • Karp, Larry S. & Perloff, Jeffrey M., 1994. "The optimal suppression of a low-cost technology by a durable-good monopoly," CUDARE Working Papers 47279, University of California, Berkeley, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucbecw:47279
    DOI: 10.22004/ag.econ.47279
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    Cited by:

    1. Yang, Liu & Wang, Yonggui & Ma, Jun & Ng, Chi To & Cheng, T.C.E., 2014. "Technology investment under flexible capacity strategy with demand uncertainty," International Journal of Production Economics, Elsevier, vol. 154(C), pages 190-197.
    2. Gerstle, Ari D. & Waldman, Michael, 2016. "Mergers in durable-goods industries: A re-examination of market power and welfare effects," Research in Economics, Elsevier, vol. 70(4), pages 677-692.
    3. Kutsoati, Edward & Zabojnik, Jan, 2005. "The effects of learning-by-doing on product innovation by a durable good monopolist," International Journal of Industrial Organization, Elsevier, vol. 23(1-2), pages 83-108, February.
    4. Ramesh Sankaranarayanan, 2007. "Innovation and the Durable Goods Monopolist: The Optimality of Frequent New-Version Releases," Marketing Science, INFORMS, vol. 26(6), pages 774-791, 11-12.
    5. Amagoia Sagasta & José M. Usategui, 2015. "Purchase and rental subsidies in durable-oligopolies," Hacienda Pública Española / Review of Public Economics, IEF, vol. 213(2), pages 11-40, June.
    6. Edward Kutsoati & Jan Zabojnik, 2001. "Durable Goods Monopoly, Learning-by-doing and "Sleeping Patents"," Discussion Papers Series, Department of Economics, Tufts University 0105, Department of Economics, Tufts University.
    7. Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
    8. Ding, Yucheng, 2014. "Why Branded Firm may Benefit from Counterfeit Competition," MPRA Paper 52933, University Library of Munich, Germany.
    9. Michael Waldman, 2004. "Antitrust Perspectives for Durable-Goods Markets," CESifo Working Paper Series 1306, CESifo.
    10. Justin P. Johnson & Henry S. Schneider & Michael Waldman, 2014. "The Role and Growth of New-Car Leasing: Theory and Evidence," Journal of Law and Economics, University of Chicago Press, vol. 57(3), pages 665-698.
    11. Waldman, Michael, 1997. "Eliminating the Market for Secondhand Goods: An Alternative Explanation for Leasing," Journal of Law and Economics, University of Chicago Press, vol. 40(1), pages 61-92, April.
    12. Justin P. Johnson & Michael Waldman, 2010. "Leasing, Lemons, and Moral Hazard," Journal of Law and Economics, University of Chicago Press, vol. 53(2), pages 307-328, May.

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