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Eliminating the Market for Secondhand Goods: An Alternative Explanation for Leasing

Listed author(s):
  • Waldman, Michael

There are a number of prominent specific instances in which a durable goods manufacturer with significant market power employed a lease-only policy: United Shoe in the market for shoe machinery, (ii) IBM in the market for computers and (iii) Xerox in the market for copiers. The obvious question that arises is, Why would such a firm prefer leasing over selling? In this article the author argues that one role of the lease-only policy was to eliminate the market for secondhand goods. The article formally demonstrates the argument, discusses the relationship between this article and earlier literature on secondhand markets, and discusses the implications for antitrust policy. Copyright 1997 by the University of Chicago.

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File URL: http://dx.doi.org/10.1086/467366
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Article provided by University of Chicago Press in its journal Journal of Law & Economics.

Volume (Year): 40 (1997)
Issue (Month): 1 (April)
Pages: 61-92

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Handle: RePEc:ucp:jlawec:v:40:y:1997:i:1:p:61-92
Contact details of provider: Web page: http://www.journals.uchicago.edu/JLE/

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  1. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-332, April.
  2. Daniel A. Levinthal & Devavrat Purohit, 1989. "Durable Goods and Product Obsolescence," Marketing Science, INFORMS, vol. 8(1), pages 35-56.
  3. Michael Waldman, 1996. "Planned Obsolescence and the R&D Decision," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 583-595, Autumn.
  4. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
  5. Eric Maskin & John Riley, 1984. "Monopoly with Incomplete Information," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 171-196, Summer.
  6. 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 1459-1478, December.
  7. DeGraba, Patrick, 1994. "No Lease is Short Enough to Solve the Time Inconsistency Problem," Journal of Industrial Economics, Wiley Blackwell, vol. 42(4), pages 361-374, December.
  8. Jeremy Bulow, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 729-749.
  9. Choi, Jay Pil, 1994. "Network Externality, Compatibility Choice, and Planned Obsolescence," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 167-182, June.
  10. Masten, Scott E & Snyder, Edward A, 1993. "United States versus United Shoe Machinery Corporation: On the Merits," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 33-70, April.
  11. Benjamin, Daniel K & Kormendi, Roger C, 1974. "The Interrelationship between Markets for New and Used Durable Goods," Journal of Law and Economics, University of Chicago Press, vol. 17(2), pages 381-401, October.
  12. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
  13. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  14. Larry S. Karp & Jeffrey M. Perloff, 1996. "The Optimal Suppression of a Low-Cost Technology by a Durable-Good Monopoly," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 346-364, Summer.
  15. Liebowitz, S J, 1982. "Durability, Market Structure, and New-Used Goods Models," American Economic Review, American Economic Association, vol. 72(4), pages 816-824, September.
  16. Kahn, Charles M, 1986. "The Durable Goods Monopolist and Consistency with Increasing Costs," Econometrica, Econometric Society, vol. 54(2), pages 275-294, March.
  17. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-641, August.
  18. Miller, H Laurence, Jr, 1974. "On Killing off the Market for Used Textbooks and the Relationship between Markets for New and Secondhand Goods," Journal of Political Economy, University of Chicago Press, vol. 82(3), pages 612-619, May/June.
  19. Waldman, Michael, 1996. "Durable Goods Pricing When Quality Matters," The Journal of Business, University of Chicago Press, vol. 69(4), pages 489-510, October.
  20. Rust, John, 1986. "When Is It Optimal to Kill Off the Market for Used Durable Goods?," Econometrica, Econometric Society, vol. 54(1), pages 65-86, January.
  21. Michael Waldman, 1993. "A New Perspective on Planned Obsolescence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 273-283.
  22. Butz, David A, 1990. "Durable-Good Monopoly and Best-Price Provisions," American Economic Review, American Economic Association, vol. 80(5), pages 1062-1076, December.
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