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Upgrades, Tradeins, and Buybacks

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  • Drew Fudenberg
  • Jean Tirole

Abstract

We study monopoly pricing of overlapping generations of a durable good. We consider two sorts of goods: those with an active secondhand market and anonymous consumers, such as textbooks, and those with no secondhand market and consumers who can prove that they purchased the old good to qualify for a discount on the new one, such as software. In the first case we show that the monopolist may choose to either produce or repurchase the old good once the new one becomes available. In the latter case we determine when the monopolist chooses to offer upgrade discounts.

Suggested Citation

  • Drew Fudenberg & Jean Tirole, 1998. "Upgrades, Tradeins, and Buybacks," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 235-258, Summer.
  • Handle: RePEc:rje:randje:v:29:y:1998:i:summer:p:235-258
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    Cited by:

    1. Juan Ruiz, 2003. "Another Perspective on Planned obsolescence: is there really too much Innovation?," Industrial Organization 0302001, EconWPA.
    2. Li, Kate J. & Xu, Susan H., 2015. "The comparison between trade-in and leasing of a product with technology innovations," Omega, Elsevier, vol. 54(C), pages 134-146.
    3. Gerstle, Ari D. & Waldman, Michael, 2016. "Mergers in durable-goods industries: A re-examination of market power and welfare effects," Research in Economics, Elsevier, vol. 70(4), pages 677-692.
    4. Huang, Jian & Leng, Mingming & Liang, Liping & Luo, Chunlin, 2014. "Qualifying for a government’s scrappage program to stimulate consumers’ trade-in transactions? Analysis of an automobile supply chain involving a manufacturer and a retailer," European Journal of Operational Research, Elsevier, vol. 239(2), pages 363-376.
    5. Xiao, Yongbo, 2017. "Choosing the right exchange-old-for-new programs for durable goods with a rollover," European Journal of Operational Research, Elsevier, vol. 259(2), pages 512-526.
    6. William Caylor, 2016. "Credible Signals Of The Release Of New Versions," Economic Inquiry, Western Economic Association International, vol. 54(2), pages 862-878, April.
    7. Anton, James J. & Biglaiser, Gary, 2013. "Quality, upgrades and equilibrium in a dynamic monopoly market," Journal of Economic Theory, Elsevier, vol. 148(3), pages 1179-1212.
    8. Eric Brouillat, 2015. "Live fast, die young? Investigating product life spans and obsolescence in an agent-based model," Journal of Evolutionary Economics, Springer, vol. 25(2), pages 447-473, April.
    9. Curtis Taylor & Liad Wagman, 2008. "Who Benefits From Online Privacy?," Working Papers 08-26, NET Institute.
    10. repec:eee:ejores:v:266:y:2018:i:3:p:1044-1061 is not listed on IDEAS
    11. Steven J. Davis & Jack MacCrisken & Kevin M. Murphy, 2001. "Economic Perspectives on Software Design: PC Operating Systems and Platforms," NBER Working Papers 8411, National Bureau of Economic Research, Inc.
    12. Sang‐Ho Lee & Le Duc Niem, 2010. "A Note On Durable Goods Monopolists: Commitment To Forward Compatibility," The Japanese Economic Review, Japanese Economic Association, vol. 61(4), pages 558-564, December.
    13. Taylor, Curtis & Wagman, Liad, 2014. "Consumer privacy in oligopolistic markets: Winners, losers, and welfare," International Journal of Industrial Organization, Elsevier, vol. 34(C), pages 80-84.
    14. Major, Iván, 2008. "Információmegosztás a bankok között. Mikor jó a teljes lista?
      [Sharing of information among banks. When is full-list a good thing?]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 763-781.
    15. Qiu_Hong Wang & Kai-Lung Hui, 2005. "Technology Timing and Pricing In the Presence of an Installed Base," Industrial Organization 0512013, EconWPA.
    16. Kai-Lung Hui & Qiu-Hong Wang, 2005. "Delayed Product Introduction," Industrial Organization 0503011, EconWPA.
    17. repec:bla:irvfin:v:17:y:2017:i:1:p:147-154 is not listed on IDEAS
    18. Ivan Major, 2013. "Information Sharing Among Banks About Borrowers: What Type Would They Support?," IEHAS Discussion Papers 1316, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    19. Souza, Eduardo Correia de & Batista, Jorge Chami, 2014. "Replacement Cycles, Income Distribution, and Dynamic Price Discrimination," Insper Working Papers wpe_331, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
    20. Awrey, Dan, 2013. "Toward a supply-side theory of financial innovation," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 401-419.
    21. Jin-Hyuk Kim, 2008. "Digital Rights Management and Technological Tying," Working Papers 08-05, NET Institute, revised Sep 2008.
    22. Atsuo Utaka, 2015. "High Price Strategy and Quality Signalling," The Japanese Economic Review, Japanese Economic Association, vol. 66(3), pages 408-420, September.
    23. Cerquera Dussán, Daniel, 2007. "Durable Goods, Innovation and Network Externalities," ZEW Discussion Papers 07-086, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    24. Xiong, Yu & Zhao, Pei & Xiong, Zhongkai & Li, Gendao, 2016. "The impact of product upgrading on the decision of entrance to a secondary market," European Journal of Operational Research, Elsevier, vol. 252(2), pages 443-454.
    25. Jia, Junxiu & Zhang, Jiang, 2013. "Dynamic ordering and pricing strategies in a two-tier multi-generation durable goods supply chain," International Journal of Production Economics, Elsevier, vol. 144(1), pages 135-142.

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