Coase’s conjecture in finite horizon

Michal Ostatnicky

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: In this paper Coase's Conjecture is analyzed in a finite-horizon formulation. In addition to utility discounting models decreasing-willingness-to-pay models are analyzed. We find that in contrast to Coase's Conjecture a monopolist may extract full monopoly profit in the finite-horizon problem under certain conditions; in fact, the monopolist does not have any reason to attract traders and waits until they come and trade. However, including utility discounting or decreasing-willingness-to-pay on the purchasers' side the monopolist's profit may dramatically decrease. The monopolist tries to clear trades as soon as possible, which makes him sacrifice a part of his one-shot monopoly profit to attract traders to buy.

Keywords: Coase's conjecture; Monopoly; Discounting; Decreasing willingness to pay. (search for similar items in EconPapers)
JEL-codes: C72 D42 G14 L11 L12 (search for similar items in EconPapers)
Date: 2004-11
New Economics Papers: this item is included in nep-com and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:cer:papers:wp241

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