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Durable-Goods Monopoly with Discrete Demand

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  • Bagnoli, Mark
  • Salant, Stephen W
  • Swierzbinski, Joseph E

Abstract

The authors analyze a dynamic game between consumers and the sole seller of a durable good. Unlike previous analyses, they assume that there exists a finite collection of buyers rather than a continuum. None of the main conclusions of the literature on durable-goods monopoly survives this change in assumption. Coase's conjecture that a durable-goods monopolist cannot earn supracompetitive profits in the continuous-time limit, Bulow's proposition that renting a durable is always more profitable than selling it, and Stokey's proposition that precommitting to a time path of prices is always optimal are all false when the set of buyers is finite. Copyright 1989 by University of Chicago Press.

Suggested Citation

  • 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.
  • Handle: RePEc:ucp:jpolec:v:97:y:1989:i:6:p:1459-78
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