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Durable‐Goods Monopoly With Maintenance

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  • Gregory E. Goering

Abstract

A two‐period durable‐goods monopoly product model with a competitive maintenance market is examined. Three types of monopoly solutions are calculated and contrasted to the social optimum: rentals, committed sales and uncommitted sales. Among other things, it is shown that contrary to the conventional wisdom a seller with committed power does not wish to commit ‘to act like a renter’ when maintenance is performed by buyers. This is due to the different objective functions of the buyer and seller. Furthermore, unlike earlier works, it is shown that the socially optimal amount of maintenance/repair does not occur in any sales case.

Suggested Citation

  • Gregory E. Goering, 2007. "Durable‐Goods Monopoly With Maintenance," Bulletin of Economic Research, Wiley Blackwell, vol. 59(3), pages 231-246, July.
    • Handle: RePEc:bla:buecrs:v:59:y:2007:i:3:p:231-246
    DOI: 10.1111/j.0307-3378.2007.00258.x
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    References listed on IDEAS

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    1. Swan, Peter L, 1970. "Durability of Consumption Goods," American Economic Review, American Economic Association, vol. 60(5), pages 884-894, December.
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    4. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
    5. Richard Schmalensee, 1974. "Market Structure, Durability, and Maintenance Effort," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 41(2), pages 277-287.
    6. Kinokuni, Hiroshi, 1999. "Repair Market Structure, Product Durability, and Monopoly," Australian Economic Papers, Wiley Blackwell, vol. 38(4), pages 343-353, December.
    7. Hiroshi Kinokuni, 1999. "Repair Market Structure, Product Durability, and Monopoly," Australian Economic Papers, Wiley Blackwell, vol. 38(4), pages 343-353, December.
    8. Parks, Richard W, 1979. "Durability, Maintenance and the Price of Used Assets," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 197-217, April.
    9. Waldman, Michael, 1996. "Durable Goods Pricing When Quality Matters," The Journal of Business, University of Chicago Press, vol. 69(4), pages 489-510, October.
    10. Hodaka Morita & Michael Waldman, 2004. "Durable Goods, Monopoly Maintenance, and Time Inconsistency," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(2), pages 273-302, June.
    11. Jeremy Bulow, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(4), pages 729-749.
    12. Mann, Duncan P., 1992. "Durable goods monopoly and maintenance," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 65-79, March.
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    Cited by:

    1. Michael S. Pangburn & Euthemia Stavrulaki, 2022. "From Used to New: Committing to Product Refresh Services," Sustainability, MDPI, vol. 14(8), pages 1-21, April.

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