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The Coase Problem: A Transformation of the Usual Utility Function

Author

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  • Paulo Maçãs

    (University of Beira Interior)

Abstract

Given that demand for durable goods is not constant over time, we propose in this article a transformation of the utility function, which accounts for discrete time and for the effect of different levels of income in the utility of buying. With this, the original Coase paradox will collapse. The smaller the difference of the reservation prices between high income level and low income level consumers, the higher the probability of marginal cost pricing in the present.

Suggested Citation

  • Paulo Maçãs, 2003. "The Coase Problem: A Transformation of the Usual Utility Function," Microeconomics 0303003, EconWPA.
  • Handle: RePEc:wpa:wuwpmi:0303003
    Note: Type of Document - Tex/WordPerfect/Handwritten; prepared on IBM PC - PC-TEX/UNIX Sparc TeX; to print on HP/PostScript/Franciscan monk; pages: 6 ; figures: included/request from author/draw your own
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    More about this item

    Keywords

    Utility Function; disutility; durable goods; monopoly.;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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