Tying, Compatibility and Planned Obsolescence

Chun-Hui Miao

MPRA Paper from University Library of Munich, Germany

Abstract: According to the hypothesis of planned obsolescence, a durable goods monopolist without commitment power has an excessive incentive to introduce new products that make old units obsolete, and this reduces its overall profitability. In this paper, I reconsider the above hypothesis by examining the role of competition in a monopolist's upgrade decision. I find that, when a system add-on is competitively supplied, a monopolist chooses to tie the add-on to a new system that is only backward compatible, even if a commitment of not introducing the new system is available and socially optimal. Tying facilitates a price squeeze.

Keywords: Compatibility; Durable Goods; Network Externalities; Planned Obsolescence; Tying (search for similar items in EconPapers)
JEL-codes: L12 L40 (search for similar items in EconPapers)
Date: 2008-12-31
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References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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https://mpra.ub.uni-muenchen.de/13523/1/MPRA_paper_13523.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/14767/2/MPRA_paper_14767.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/16883/1/MPRA_paper_16883.pdf revised version (application/pdf)

Related works:
Journal Article: TYING, COMPATIBILITY AND PLANNED OBSOLESCENCE (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:13523

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