Durable-Goods Monopoly with Stochastic Values

Andrew R Biehl

RAND Journal of Economics, 2001, vol. 32, issue 3, 565-77

Abstract: I analyze a durable-goods model that allows consumers' values to vary over time. The optimal mechanism for a monopolist is computed and compared to both the sales and leasing equilibria. I show that sales may implement the optimal strategy, and that the dominance of leasing over sales is not necessarily true. This implication is consistent with the prevalence of simple sales contracts in many markets. Copyright 2001 by the RAND Corporation.

Date: 2001
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