Durable Goods Monopoly with Entry of New Consumers

Joel Sobel

Econometrica, 1991, vol. 59, issue 5, 1455-85

Abstract: A dynamic monopolist produces at constant unit cost. Each period a new cohort of consumers enters the market. Each entering cohort is identical. Consumers within a cohort have different tastes. The paper shows that if players are sufficiently patient, any positive average profit less than the maximum feasible level can be attained in a subgame-perfect equilibrium; in stationary subgame-perfect equilibria, the seller cannot make sales at prices sufficiently greater than the lowest willingness-to-pay when period length goes to zero; and the seller attains the maximum commitment profit by charging the same (static monopoly) price in every period. Copyright 1991 by The Econometric Society.

Date: 1991
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