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Asymmetric Information and Differentiated Durable Goods Monopoly: Intra-Period Versus Intertemporal Price Discrimination

Author

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  • Didier Laussel
  • Ngo Van Long
  • Joana Resende

Abstract

A durable good monopolist faces a continuum of heterogeneous customers who make purchase decisions by comparing present and expected price-quality offers. The monopolist designs a sequence of price-quality menus to segment the market. We consider the Markov Perfect Equilibrium (MPE) of a game where the monopolist is unable to commit to future price-quality menus. We obtain the novel results that (a) under certain conditions, the monopolist covers the whole market in the first period (even when a static Mussa-Rosen monopolist would not cover the whole market), because this is a strategic means to convince customers that lower prices would not be offered in future periods, and that (b) this can happen only under the stage-wise Stackelberg leadership assumption (whereby consumers base their expectations on the value of the state variable at the end of the period). Conditions under which MPE necessarily involve sequentially trading are also derived.

Suggested Citation

  • Didier Laussel & Ngo Van Long & Joana Resende, 2021. "Asymmetric Information and Differentiated Durable Goods Monopoly: Intra-Period Versus Intertemporal Price Discrimination," CESifo Working Paper Series 9294, CESifo.
    • Handle: RePEc:ces:ceswps:_9294
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    References listed on IDEAS

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    1. Driskill, Robert & McCafferty, Stephen, 2001. "Monopoly and Oligopoly Provision of Addictive Goods," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 43-72, February.
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    6. Inderst, Roman, 2008. "Durable goods with quality differentiation," Economics Letters, Elsevier, vol. 100(2), pages 173-177, August.
    7. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
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    Cited by:

    1. Didier Laussel & Ngo Van Long, 2021. "Quality Differentiation in Durable Goods Monopoly Always Yields Strictly Positive Profits," CESifo Working Paper Series 9331, CESifo.

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    More about this item

    Keywords

    product quality; durable good monopoly; second-degree price discrimination; Coase conjecture;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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