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Durable-Goods Monopoly with Stochastic Values

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  • Biehl, Andrew R

Abstract

I analyze a durable-goods model that allows consumers' values to vary over time. The optimal mechanism for a monopolist is computed and compared to both the sales and leasing equilibria. I show that sales may implement the optimal strategy, and that the dominance of leasing over sales is not necessarily true. This implication is consistent with the prevalence of simple sales contracts in many markets. Copyright 2001 by the RAND Corporation.

Suggested Citation

  • Biehl, Andrew R, 2001. "Durable-Goods Monopoly with Stochastic Values," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 565-577, Autumn.
  • Handle: RePEc:rje:randje:v:32:y:2001:i:3:p:565-77
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    Cited by:

    1. Huan Xie, 2013. "Bargaining with uncertain value distributions," Economics Bulletin, AccessEcon, vol. 33(2), pages 1047-1066.
    2. Szymanowski, M.G., 2009. "Consumption-based learning about brand quality : Essays on how private labels share and borrow reputation," Other publications TiSEM b12825d8-5e21-4437-adda-b, Tilburg University, School of Economics and Management.
    3. Simon Board, 2005. "Durable-Goods Monopoly with Varying Cohorts," 2005 Meeting Papers 847, Society for Economic Dynamics.
    4. Battaglini, Marco, 2007. "Optimality and renegotiation in dynamic contracting," Games and Economic Behavior, Elsevier, vol. 60(2), pages 213-246, August.
    5. Michael Kremer & Christopher Snyder, 2015. "Preventives Versus Treatments," NBER Working Papers 21012, National Bureau of Economic Research, Inc.
    6. Daniel F. Garrett, 2016. "Intertemporal Price Discrimination: Dynamic Arrivals and Changing Values," American Economic Review, American Economic Association, vol. 106(11), pages 3275-3299, November.
    7. Justin P. Johnson & David P. Myatt, 2006. "On the Simple Economics of Advertising, Marketing, and Product Design," American Economic Review, American Economic Association, vol. 96(3), pages 756-784, June.
    8. Yan, Wei & Li, Youwei & Wu, Ying & Palmer, Mark, 2016. "A rising e-channel tide lifts all boats? The impact of manufacturer multi-channel encroachment on traditional selling and leasing," MPRA Paper 70747, University Library of Munich, Germany.
    9. Heyes, Anthony & Kapur, Sandeep, 2012. "Community pressure for green behavior," Journal of Environmental Economics and Management, Elsevier, vol. 64(3), pages 427-441.
    10. Marco Battaglini, 2005. "Long-Term Contracting with Markovian Consumers," American Economic Review, American Economic Association, vol. 95(3), pages 637-658, June.
    11. Pasquale Schiraldi, 2006. "Second-Hand Markets and Collusion by Manufacturers of Semidurable Goods," Boston University - Department of Economics - Working Papers Series WP2006-028, Boston University - Department of Economics.

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