American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Differentiated Durable Goods Monopoly: A Robust Coase Conjecture
American Economic Review
vol. 109,
no. 5, May 2019
(pp. 1930–68)
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.Citation
Nava, Francesco, and Pasquale Schiraldi. 2019. "Differentiated Durable Goods Monopoly: A Robust Coase Conjecture." American Economic Review, 109 (5): 1930–68. DOI: 10.1257/aer.20160404Additional Materials
JEL Classification
- C78 Bargaining Theory; Matching Theory
- D42 Market Structure, Pricing, and Design: Monopoly
- L12 Monopoly; Monopolization Strategies