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

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Author Info

  • Karp, Larry
  • 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.

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Bibliographic Info

Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt0q21c15v.

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Date of creation: 01 Oct 1994
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Handle: RePEc:cdl:agrebk:qt0q21c15v

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Related research

Keywords: coase conjecture; consumers; monopolies; profits; technology;

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Cited by:
  1. Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
  2. Ding, Yucheng, 2014. "Why Branded Firm may Benefit from Counterfeit Competition," MPRA Paper 52933, University Library of Munich, Germany.

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