IDEAS home Printed from https://ideas.repec.org/a/rje/bellje/v1y1970ispringp54-64.html
   My bibliography  Save this article

Regulation and the Durability of Goods

Author

Listed:
  • Richard L. Schmalensee

Abstract

This paper considers the production of durable goods that deteriorate at a constant percentage rate under conditions of competitive and monopoly equilibrium. A perfect market in used units of the good is assumed, as is constant returns to scale in production. It is shown that a monopolist will generally produce goods that deteriorate faster than those produced by a competitive industry. Regulation of the durability of the monopolist's output will always cause him to increase the volume of services of the good available to the market. Government intervention to limit the monopolist's price-cost margin may cause the firm to increase the deterioration rate of its output, and such regulation may also lead the monopolist to decrease the volume of services of the good available to the market. In this case, regulation will have effects exactly contrary to the presumed intent of the regulators. The impact of price regulation is shown to depend on the shape of the demand curve for the services of the durable good. Finally, it is pointed out that both price and durability must be regulated if a monopolist is to be made to reproduce competitive performance.

Suggested Citation

  • Richard L. Schmalensee, 1970. "Regulation and the Durability of Goods," Bell Journal of Economics, The RAND Corporation, vol. 1(1), pages 54-64, Spring.
  • Handle: RePEc:rje:bellje:v:1:y:1970:i:spring:p:54-64
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0005-8556%28197021%291%3A1%3C54%3ARATDOG%3E2.0.CO%3B2-V&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Adriano Rampini, 2015. "Financing Durable Assets," 2015 Meeting Papers 915, Society for Economic Dynamics.
    2. Peran van Reeven & Enrico Pennings, 2016. "On the relation between multimarket contact and service quality: Mutual forbearance or network coordination?," Strategic Management Journal, Wiley Blackwell, vol. 37(10), pages 2121-2134, October.
    3. Oded Koenigsberg & Rajeev Kohli & Ricardo Montoya, 2011. "The Design of Durable Goods," Marketing Science, INFORMS, vol. 30(1), pages 111-122, 01-02.
    4. Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
    5. Morton I. Kamien & Nancy L. Schwartz, 1972. "Product Durability Under Monopoly and Competition," Discussion Papers 7, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    6. Morton I. Kamien & Nancy Schwartz, 1975. "Optimal Capital Accumulation and Durable Goods Production," Discussion Papers 141, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rje:bellje:v:1:y:1970:i:spring:p:54-64. 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: (). General contact details of provider: http://www.rje.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.