Interfering with Secondary Markets
We present a model to address in a unified manner four ways in which a monopolist can interfere with secondary markets. In the model, consumers have heterogeneous valuations for quality so that used-good markets play an allocative role. Our results are the following: (1) In contrast to Swan's famous independence result, a monopolist does not provide socially optimal durability. (2) Allowing the monopolist to rent does not restore socially optimal durability and increases the monopolist's market power in the used market. However, forcing the monopolist to sell the goods may be a bad policy because it would lead to either lower output or lower durability. (3) The manufacturer benefits from a well functioning used-good market despite the fact that used goods provide competition for new goods. (4) The monopolist prefers to restrict consumers' abilities to maintain the good.
Volume (Year): 30 (1999)
Issue (Month): 1 (Spring)
|Contact details of provider:|| Web page: http://www.rje.org|
|Order Information:||Web: https://editorialexpress.com/cgi-bin/rje_online.cgi|
When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:30:y:1999:i:spring:p:1-21. 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: ()
If references are entirely missing, you can add them using this form.