What is the optimal strategy of a durable-goods monopolist that can offer goods in different qualities? This Paper provides an answer for the case where the market is segmented into low- and high-income buyers. If the monopolist can change their product and price policy sufficiently rapidly - which reduces their commitment power - we find that the whole market is served immediately. Low-quality goods may be sold below costs. These results are strikingly different to those obtained with non-durable goods and to those obtained if the durable good comes only in a single quality. In an extension we further employ our results to discuss how policies of restricted versioning fare differently with non-durable and durable goods.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
4047.
Find related papers by JEL classification: C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
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