Durable Goods Monopoly, Learning-by-doing and "Sleeping Patents"

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Durable Goods Monopoly, Learning-by-doing and "Sleeping Patents"

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Edward Kutsoati ()
Jan Zabojnik ()

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Abstract

We analyze a durable good monopolist's decision to adopt a new and more efficient technology that is readily available at no cost. After an initial period of learning by doing, the new technology can either lower the cost of production, or make the good more attractive to consumers. We show that for certain parameter values, the monopolist finds it optimal to continue using the inferior production technology. An implication for welfare purposes is that a durable good monopolist may hold onto a "sleeping patent" when its use is socially desirable. However, we also show that sometimes the monopolist innovates too much relative to the socially optimal level.

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Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0105.

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Date of creation: 2001
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Handle: RePEc:tuf:tuftec:0105

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This paper has been announced in the following NEP Reports:

NEP-ALL-2004-08-31 (All new papers)
NEP-COM-2004-08-31 (Industrial Competition)
NEP-MIC-2001-07-30 (Microeconomics)

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.:

Choi, Jay Pil, 1994. "Network Externality, Compatibility Choice, and Planned Obsolescence," Journal of Industrial Economics, Blackwell Publishing, vol. 42(2), pages 167-82, June. [Downloadable!] (restricted)
Other versions:
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Larry S. Karp & Jeffrey M. Perloff, 1996. "The Optimal Suppression of a Low-Cost Technology by a Durable-Good Monopoly," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 346-364, Summer. [Downloadable!] (restricted)
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Chi, Woody Chih-Yi, 1999. "Quality choice and the Coase problem," Economics Letters, Elsevier, vol. 64(1), pages 107-115, July. [Downloadable!] (restricted)
Sobel, Joel, 1991. "Durable Goods Monopoly with Entry of New Consumers," Econometrica, Econometric Society, vol. 59(5), pages 1455-85, September. [Downloadable!] (restricted)
Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June. [Downloadable!] (restricted)
Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-26, June. [Downloadable!] (restricted)

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Cited by:
(explanations, 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.)

Palomeras, Neus, 2003. "Sleeping patents: any reason to wake up?," IESE Research Papers D/506, IESE Business School. [Downloadable!]
Ari Gerstle & Michael Waldman, . "Mergers In Durable-Goods Industries: A Re-Examination Of Market Power And Welfare Effects," American Law & Economics Association Annual Meetings 1038, American Law & Economics Association. [Downloadable!]

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