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Differentiated durable goods monopoly: a robust Coase conjecture

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  • Nava, Francesco
  • Schiraldi, Pasquale

Abstract

The paper analyzes a durable goods monopoly problem in which multiple varieties can be sold. A robust Coase conjecture establishes that the market eventually clears, with profits exceeding static optimal market-clearing profits and converging to this lower bound in all stationary equilibria with instantaneous price revisions. Pricing need not be efficient, nor is it minimal (equal to the maximum of marginal cost and minimal value), and can lead to cross-subsidization. Conclusions nest both classical Coasian insights and modern Coasian failures. The option to scrap products does not affect results qualitatively, but delivers a novel motive for selling high cost products.

Suggested Citation

  • Nava, Francesco & Schiraldi, Pasquale, 2019. "Differentiated durable goods monopoly: a robust Coase conjecture," LSE Research Online Documents on Economics 90512, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:90512
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    File URL: http://eprints.lse.ac.uk/90512/
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    References listed on IDEAS

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    Cited by:

    1. Laussel, Didier & Long, Ngo Van & Resende, Joana, 2020. "Quality and price personalization under customer recognition: A dynamic monopoly model with contrasting equilibria," Journal of Economic Dynamics and Control, Elsevier, vol. 114(C).
    2. Doval, Laura & Skreta, Vasiliki, 2019. "Optimal mechanism for the sale of a durable good," CEPR Discussion Papers 13967, C.E.P.R. Discussion Papers.
    3. Antoniou, Fabio & Fiocco, Raffaele, 2020. "Storable good market with intertemporal cost variations," MPRA Paper 97948, University Library of Munich, Germany.
    4. Laura Doval & Vasiliki Skreta, 2019. "Optimal mechanism for the sale of a durable good," Papers 1904.07456, arXiv.org, revised Aug 2020.

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    More about this item

    Keywords

    Coase conjecture; monopoly; product design; dynamic pricing;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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