Quality differentiation in durable goods monopoly always yields strictly positive profits

Didier Laussel () and Ngo Long
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Didier Laussel: Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE

Economics Bulletin, 2022, vol. 42, issue 2, 546 - 552

Abstract: A durable good monopolist can discriminate between buyers in each period by offering them a sequence of price-quality menus (second-degree price discrimination). We show that, contrary to the Coase conjecture for the homogeneous durable good monopoly, under vertical differentiation, when the consumers base their expectations on the size of the market at the end of each period, the profit of a monopolist that cannot commit to future price-quality menus is bounded below by a strictly positive value independent of the discount factor.

Keywords: product quality; durable good monopoly; second-degree price discrimination; Coase conjecture. (search for similar items in EconPapers)
JEL-codes: C7 L1 (search for similar items in EconPapers)
Date: 2022-06-30
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Working Paper: Quality Differentiation in Durable Goods Monopoly Always Yields Strictly Positive Profits (2021)
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