Product Innovation by a Durable-Good Monpoly

Arthur Fishman () and Rafael Rob
Authors registered in the RePEc Author Service: Rafael Robb

RAND Journal of Economics, 2000, vol. 31, issue 2, 237-252

Abstract: We consider a durable-good monopolist that periodically introduces new models, each new model representing an improvement upon its predecessor. We show that if the monopolist is able neither to exercise planned obsolescence (i.e., artificially shorten the lift of its products) nor to give discounts to repeat customers, the rate of product introductions is too slow -- in comparison with the social optimum. On the other hand, if the monopolist is able to artificially shorten the durability of its products or to offer price discounts to repeat customers, it can raise its profit and, at the same time, implement the social optimum.

Date: 2000
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