Economics at your fingertips  

A Note on Vertical Differentiation of Durable Goods: Sellers, Renters and Moral Hazard

George Geronikolaou

Journal of Industry, Competition and Trade, 2018, vol. 18, issue 1, 97-106

Abstract: Abstract This paper examines strategic interaction between firms that differentiate their goods with respect to durability and compete in prices. Two separate cases in which competing firms are either renters or sellers are examined. Although sellers face a dynamic consistency problem and pricing equilibria in the two cases are different, profits and consumer surpluses are identical within the two games. The introduction of moral hazard in the rental market creates an interesting complication because it increases equilibrium rental prices and has a profit enhancing effect for the low-durability renter.

Keywords: Vertical differentiation; Durable goods; Bertrand competition; Oligopoly; Moral hazard; L11; L13; L15 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/10842/PS2

Access Statistics for this article

Journal of Industry, Competition and Trade is currently edited by Karl Aiginger, Marcel Canoy and Michael Peneder

More articles in Journal of Industry, Competition and Trade from Springer
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-01-01
Handle: RePEc:kap:jincot:v:18:y:2018:i:1:d:10.1007_s10842-017-0253-4