Monopoly Distortions in Durability and Multi-Dimensional Quality

Roland Strausz ()

No 271, Discussion Papers from SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: I show that Swan’s (1970) independence result requires a mul- tiplicative interaction between durability and all other quality at- tributes. Because there is no compelling argument for a multiplica- tivity in quality, monopolists tend to distort durability, even with constant marginal costs. Distortions in durability and other quality aspects are aligned exactly when the marginal cost of quality do not increase too much with durability.

Keywords: Durability; quality; monopoly (search for similar items in EconPapers)
JEL-codes: L15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-ind
Date: 2009-09
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