American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Storable Good Monopoly: The Role of Commitment
American Economic Review
vol. 96,
no. 5, December 2006
(pp. 1706–1719)
Abstract
We study dynamic monopoly pricing of storable goods in an environment where demand changes over time. The literature on durables has focused on incentives to delay purchases. Our analysis focuses on a different intertemporal demand incentive. The key force on the consumer side is advance purchases or stockpiling. In the case of storable goods, the stockpiling motive has recently been documented empirically. We show that, in this environment, if the monopolist cannot commit, then prices are higher in all periods, and social welfare is lower, than in the case in which the monopolist can commit. This is in contrast with the analysis in the literature on the Coase conjecture. (JEL D21, D42, L12)Citation
Dudine, Paolo, Igal Hendel, and Alessandro Lizzeri. 2006. "Storable Good Monopoly: The Role of Commitment." American Economic Review, 96 (5): 1706–1719. DOI: 10.1257/aer.96.5.1706Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D42 Market Structure and Pricing: Monopoly
- L12 Monopoly; Monopolization Strategies