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Asymmetric Information and Differentiated Durable Goods Monopoly: Intra-Period Versus Intertemporal Discrimination

Author

Listed:
  • Didier Laussel

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

  • Ngo van Long

    (Department of Economics [McGill University] - McGill University = Université McGill [Montréal, Canada], Hitotsubashi Institute for Advanced Study)

  • Joana Resende

    (Universidade do Porto = University of Porto)

Abstract

A durable good monopolist faces a continuum of heterogeneous customers who make purchase decisions by comparing present and expected price-quality offers. The monopolist designs a sequence of price-quality menus to segment the market. We consider the Markov perfect equilibrium (MPE) of a game where the monopolist is unable to commit to future price-quality menus. We obtain the novel results that: (a) under certain conditions, the monopolist covers the whole market in the first period (even when a static Mussa–Rosen monopolist would not cover the whole market), because this is a strategic means to convince customers that lower prices would not be offered in future periods and that (b) this can happen only under the stage-wise Stackelberg leadership assumption (whereby consumers base their expectations on the value of the state variable at the end of the period). Conditions under which MPE necessarily involves sequentially trading are also derived.

Suggested Citation

  • Didier Laussel & Ngo van Long & Joana Resende, 2022. "Asymmetric Information and Differentiated Durable Goods Monopoly: Intra-Period Versus Intertemporal Discrimination," Post-Print hal-03434362, HAL.
    • Handle: RePEc:hal:journl:hal-03434362
    DOI: 10.1007/s13235-021-00405-z
    Note: View the original document on HAL open archive server: https://amu.hal.science/hal-03434362
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    Cited by:

    1. Didier Laussel & Ngo Van Long, 2022. "Quality differentiation in durable goods monopoly always yields strictly positive profits," Economics Bulletin, AccessEcon, vol. 42(2), pages 546-552.

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    Keywords

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    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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