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Monopoly Distortions in Durability and Multi-Dimensional Quality

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Author Info
Roland Strausz () (Humboldt-Universitaet zu Berlin)

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Abstract

I show that Swan’s (1970) independence result requires a mul- tiplicative interaction between durability and all other quality at- tributes. Because there is no compelling argument for a multiplica- tivity in quality, monopolists tend to distort durability, even with constant marginal costs. Distortions in durability and other quality aspects are aligned exactly when the marginal cost of quality do not increase too much with durability.

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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 271.

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Date of creation: Sep 2009
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Handle: RePEc:trf:wpaper:271

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Related research
Keywords: Durability; quality; monopoly;

Find related papers by JEL classification:
L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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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. Swan, Peter L, 1970. "Market Structure and Technological Progress: The Influence of Monopoly on Product Innovation," The Quarterly Journal of Economics, MIT Press, vol. 84(4), pages 627-38, November. [Downloadable!] (restricted)
  2. Inderst, Roman, 2008. "Durable goods with quality differentiation," Economics Letters, Elsevier, vol. 100(2), pages 173-177, August. [Downloadable!] (restricted)
  3. Chi, Woody Chih-Yi, 1999. "Quality choice and the Coase problem," Economics Letters, Elsevier, vol. 64(1), pages 107-115, July. [Downloadable!] (restricted)
  4. Sieper, E & Swan, P L, 1973. "Monopoly and Competition in the Market for Durable Goods," Review of Economic Studies, Blackwell Publishing, vol. 40(3), pages 333-51, July. [Downloadable!] (restricted)
  5. Roland Strausz, 2009. "Planned Obsolescence as an Incentive Device for Unobservable Quality," Economic Journal, Royal Economic Society, vol. 119(540), pages 1405-1421, October. [Downloadable!] (restricted)
  6. David Levhari & Yoram Peles, 1973. "Market Structure, Quality and Durability," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 235-248, Spring. [Downloadable!] (restricted)
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