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Coase versus Pacman: Who Eats Whom in the Durable-Goods Monopoly?

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  • von der Fehr, Nils-Henrik Morch
  • Kuhn, Kai-Uwe

Abstract

In standard durable-goods monopoly models, both the set of buyers and the set of prices are assumed to be continua. If the set of buyers is finite, the perfectly discriminating monopoly outcome is a unique subgame perfect equilibrium when the seller is sufficiently patient. Introducing instead a smallest unit of account yields the Coasian outcome as a generically unique subgame perfect equilibrium for patient enough buyers. A folk theorem is obtained if both sets are finite. These results reflect a strategic disadvantage of having to make moves with a large impact on other players' payoffs. The analysis is extended to durable-goods oligopoly. Copyright 1995 by University of Chicago Press.

Suggested Citation

  • von der Fehr, Nils-Henrik Morch & Kuhn, Kai-Uwe, 1995. "Coase versus Pacman: Who Eats Whom in the Durable-Goods Monopoly?," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 785-812, August.
    • Handle: RePEc:ucp:jpolec:v:103:y:1995:i:4:p:785-812
    DOI: 10.1086/262003
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    References listed on IDEAS

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    1. Van Damme, Eric & Selten, Reinhard & Winter, Eyal, 1990. "Alternating bid bargaining with a smallest money unit," Games and Economic Behavior, Elsevier, vol. 2(2), pages 188-201, June.
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    6. van Damme, E.E.C. & Selten, R. & Winter, E., 1989. "Alternating bid bargaining with a smallest money unit," Other publications TiSEM 90090bee-21fd-4bb7-ac48-d, Tilburg University, School of Economics and Management.
    7. Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June.
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