PRICING OF COMPLEMENTARY GOODS AS AN IMPLICIT FINANCIAL ARRANGEMENT
Jinhyuk Lee and
Hitotsubashi Journal of Economics, 2014, vol. 55, issue 2, 207-228
This paper studies the common pricing practice of firms selling a durable good at a low price and a complementary consumable good at a high price. In our model, consumers discount future payments while firms receive a steady-state flow of revenues from selling the durable and consumable goods. As a result, there are potential gains from deferring consumers' payments to the future. We show that when firms commit to constant prices and consumer lock-in is possible, firms choose pricing consistent with the practice in monopoly and competition. Our result provides a new efficiency argument in the aftermarket literature.
Keywords: aftermarkets; complementary goods; consumer lock-in; durable goods; implicit; financial arrangements (search for similar items in EconPapers)
JEL-codes: L10 L15 D40 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hit:hitjec:v:55:y:2014:i:2:p:207-228
Access Statistics for this article
More articles in Hitotsubashi Journal of Economics from Hitotsubashi University Contact information at EDIRC.
Bibliographic data for series maintained by Digital Resources Section, Hitotsubashi University Library ().