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Digital Durable Goods Monopoly

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  • Zihao Li

Abstract

This paper develops a model of dynamic monopoly for digital durable goods characterized by two features: free disposability on the buyer side and zero marginal cost on the seller side. We show that when parties are sufficiently patient, the set of equilibrium seller payoffs contains the interval from the lowest-type buyer's efficient surplus to the static monopoly commitment payoff, subject to the constraint that the lowest-type buyer receives an efficient allocation with probability one. The reason is that when allocative efficiency is set-valued rather than single-valued, Coasian forces do not generally pin down continuation values and therefore do not select a unique payoff outcome. These results show how structural properties of digital goods generate market indeterminacy.

Suggested Citation

  • Zihao Li, 2025. "Digital Durable Goods Monopoly," Papers 2507.13137, arXiv.org, revised Jan 2026.
    • Handle: RePEc:arx:papers:2507.13137
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    References listed on IDEAS

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