Monopoly Distortions in Durability and Multi-Dimensional Quality
AbstractI show that Swanâ€™s (1970) independence result requires a multiplicative interaction between durability and all other quality attributes. Because there is no compelling argument for a multiplicativity 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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Bibliographic InfoPaper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 271.
Date of creation: Sep 2009
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Durability; quality; monopoly;
Other versions of this item:
- Strausz, Roland, 2009. "Monopoly distortions in durability and multi-dimensional quality," Economics Letters, Elsevier, vol. 105(3), pages 333-335, December.
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-09-19 (All new papers)
- NEP-COM-2009-09-19 (Industrial Competition)
- NEP-IND-2009-09-19 (Industrial Organization)
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.:
- Inderst, Roman, 2008. "Durable goods with quality differentiation," Economics Letters, Elsevier, vol. 100(2), pages 173-177, August.
- Roland Strausz, 2009. "Planned Obsolescence as an Incentive Device for Unobservable Quality," Economic Journal, Royal Economic Society, vol. 119(540), pages 1405-1421, October.
- Sieper, E & Swan, P L, 1973. "Monopoly and Competition in the Market for Durable Goods," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 333-51, July.
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, June.
- 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.
- Chi, Woody Chih-Yi, 1999. "Quality choice and the Coase problem," Economics Letters, Elsevier, vol. 64(1), pages 107-115, July.
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