Dynamic consistency and monopoly
A wide variety of papers study the time consistency issues and commitment problems associated with imperfectly competitive durable goods manufacturers who sell their output. Using a simple two-period model the authors show that this sort of commitment problem may occur even if the monopolist produces non-durable output. The model assumes consumers maximize their utility through the choice of a non-durable consumption good and saving through an asset that provides future returns and consumption flow. The analysis indicates that non-durable goods manufacturers with market power will wish to announce future prices that are sub-optimal (dynamically inconsistent) when the period is reached due to the impact on consumers' wealth constraint and current purchasing behavior. Thus, the so-called durable-goods monopoly commitment problem may also occur in non-durable goods industries. The model suggests that any type of intertemporal linkage may lead to time consistency and commitment problems for imperfectly competitive firms. Copyright International Atlantic Economic Society 2003
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 31 (2003)
Issue (Month): 2 (June)
|Contact details of provider:|| Postal: |
Phone: (404) 965-1555
Fax: (404) 965-1556
Web page: http://springerlink.metapress.com/link.asp?id=112055
More information through EDIRC
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.:
- Larry Karp & David M. Newbery, 1992. "Dynamically Consistent Oil Import Tariffs," Canadian Journal of Economics, Canadian Economics Association, vol. 25(1), pages 1-21, February.
- Bulow, Jeremy, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 729-49, November.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- Calvo, Guillermo A, 1978. "On the Time Consistency of Optimal Policy in a Monetary Economy," Econometrica, Econometric Society, vol. 46(6), pages 1411-28, November.
- Faruk Gul & Hugo Sonnenschein & Robert Wilson, 2010.
"Foundations of Dynamic Monopoly and the Coase Conjecture,"
Levine's Working Paper Archive
232, David K. Levine.
- 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.
- Dellas, Harris, 1988. "Time consistency and the feasibility of alternative exchange rate regimes," Journal of Monetary Economics, Elsevier, vol. 22(3), pages 461-472.
- Purohit, Devavrat, 1995. "Marketing Channels and the Durable Goods Monopolist: Renting versus Selling Reconsidered," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(1), pages 69-84, Spring.
- Bagnoli, Mark & Salant, Stephen W & Swierzbinski, Joseph E, 1989. "Durable-Goods Monopoly with Discrete Demand," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1459-78, December.
- Larry M. Ausubel & Raymond J. Deneckere, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Levine's Working Paper Archive 201, David K. Levine.
- Kahn, Charles M, 1986. "The Durable Goods Monopolist and Consistency with Increasing Costs," Econometrica, Econometric Society, vol. 54(2), pages 275-94, March.
- Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April.
- Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
- Dudey, Marc, 1996. "Dynamic Monopoly with Nondurable Goods," Journal of Economic Theory, Elsevier, vol. 70(2), pages 470-488, August.
- Goering, Gregory E, 1993. "Durability Choice under Demand Uncertainty," Economica, London School of Economics and Political Science, vol. 60(240), pages 397-411, November.
- Ausubel, Lawrence M & Deneckere, Raymond J, 1989. "Reputation in Bargaining and Durable Goods Monopoly," Econometrica, Econometric Society, vol. 57(3), pages 511-31, May.
- Bond, Eric W & Samuelson, Larry, 1987. "Durable Goods, Market Structure and the Incentives to Innovate," Economica, London School of Economics and Political Science, vol. 54(213), pages 57-67, February.
When requesting a correction, please mention this item's handle: RePEc:kap:atlecj:v:31:y:2003:i:2:p:188-194. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.