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Durable Goods Monopoly with Endogenous Quality

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Author Info
Jong-Hee Hahn
Abstract

This paper examines the dynamic pricing problem of a durable-good monopolist when product quality is endogenous. It is shown that the relationship between the firm's quality choice and the time-inconsistency problem crucially depends on how the unit production cost varies with quality. The monopolist may use quality as a strategic commitment device to eliminate the time-inconsistency problem. Also, it may have incentives to choose a quality higher or lower than the optimal commitment level. This contrasts with the planned obsolescence literature where durable goods monopolists reduces durability (often regarded as a measure of quality) to mitigate the time-inconsistency problem

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Paper provided by Econometric Society in its series Econometric Society 2004 Far Eastern Meetings with number 665.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:feam04:665

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Related research
Keywords: Durable Goods; Quality; Time-inconsistency;

Find related papers by JEL classification:
D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Jong-Hee Hahn, 2002. "Damaged Durable Goods," Industrial Organization 0211010, EconWPA. [Downloadable!]
  2. Eric W. Bond & Larry Samuelson, 1984. "Durable Good Monopolies with Rational Expectations and Replacement Sales," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 336-345, Autumn. [Downloadable!] (restricted)
  3. Takeyama, Lisa N, 2002. "Strategic Vertical Differentiation and Durable Goods Monopoly," Journal of Industrial Economics, Blackwell Publishing, vol. 50(1), pages 43-56, March. [Downloadable!] (restricted)
  4. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April. [Downloadable!] (restricted)
  5. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law & Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  6. Bagnoli, Mark & Salant, Stephen W & Swierzbinski, Joseph E, 1995. "Intertemporal Self-Selection with Multiple Buyers," Economic Theory, Springer, vol. 5(3), pages 513-26, May.
  7. Waldman, Michael, 1993. "A New Perspective on Planned Obsolescence," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 273-83, February. [Downloadable!] (restricted)
  8. Bagnoli, Mark & Salant, Stephen W & Swierzbinski, Joseph E, 1989. "Durable-Goods Monopoly with Discrete Demand," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1459-78, December. [Downloadable!] (restricted)
  9. Kahn, Charles M, 1986. "The Durable Goods Monopolist and Consistency with Increasing Costs," Econometrica, Econometric Society, vol. 54(2), pages 275-94, March. [Downloadable!] (restricted)
  10. Jong-Hee Hahn, 2002. "Damaged Durable Goods," Keele Economics Research Papers KERP 2002/21, Centre for Economic Research, Keele University. [Downloadable!]
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  11. Bulow, Jeremy, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 729-49, November. [Downloadable!] (restricted)
  12. von der Fehr, Nils-Henrik Morch & Kuhn, Kai-Uwe, 1995. "Coase versus Pacman: Who Eats Whom in the Durable-Goods Monopoly?," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 785-812, August. [Downloadable!] (restricted)
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