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Choice of Product Variety for the Durable Goods Monopolist

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Author Info
F. Javier Casado () (Departamento de Fundamentos del Analisis Economico, Universidad del Pais Vasco, Spain)
Ana I. Saracho () (Departamento de Fundamentos del Analisis Economico, Universidad del Pais Vasco, Spain)

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Abstract

This paper analyzes the strategic choice of variety by a monopolist seller of a durable good as a means to mitigate his commitment problem. The monopolist chooses his product variety with a goal of ensuring that a strong reduction in future prices will not be profitable because it allows the firm to attract few additional consumers. The main result that emerges from considering product variety as an endogenous variable is that, contrary to the case in which it is exogenously determined, social welfare is always higher when the monopolist cannot commit that when he can.

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Paper provided by Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística) in its series BILTOKI with number 199902.

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Date of creation: 03 Jun 1999
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Handle: RePEc:ehu:biltok:199902

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Postal: Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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Related research
Keywords: Durable Goods Monopolist; Commitment; Product Variety;

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

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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. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September. [Downloadable!] (restricted)
  2. Malueg, David A. & Solow, John L., 1987. "On requiring the durable goods monopolist to sell," Economics Letters, Elsevier, vol. 25(3), pages 283-288. [Downloadable!] (restricted)
  3. 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)
  4. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law & Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  5. Malueg, David A & Solow, John L, 1989. "A Note on Welfare in the Durable-Goods Monopoly," Economica, London School of Economics and Political Science, vol. 56(224), pages 523-27, November. [Downloadable!] (restricted)
  6. Butz, David A, 1990. "Durable-Good Monopoly and Best-Price Provisions," American Economic Review, American Economic Association, vol. 80(5), pages 1062-76, December. [Downloadable!] (restricted)
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