DURABLE GOODS PRICE CYCLES: THEORY AND EVIDENCE FROM THE TEXTBOOK MARKET

Eric Bond and Toshiaki Iizuka

Economic Inquiry, 2014, vol. 52, issue 2, 518-538

Abstract: type="main" xml:lang="en">

We study the pricing policy of a monopolist selling a durable good with the features of a textbook. We assume buyers differ in their valuation of the good and propensity to resell, and identify the possibility of a positive relationship between the quantity of used goods and the price of a new good, and also a higher price for new goods in the last period before a new edition is introduced. Our empirical analysis supports this model: textbook prices increase as the share of used textbooks increases and the end of the current edition approaches. (JEL D420, L120)

Date: 2014
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