Self-Sabotage and Durable-Goods Monopoly

Gregory E. Goering

International Journal of the Economics of Business, 2014, vol. 21, issue 2, 231-243

Abstract: We analyze a simple two-period linear demand durable-goods monopoly model with "self-sabotage." The firm has the ability to sabotage its own production by increasing its future (period two) manufacturing costs. We find that an uncommitted monopoly seller has an incentive to engage in such self-sabotage, while a committed seller or renter has no such incentive. Unlike the previous papers on self-sabotage, we show this occurs even though the firm faces no rivals in the output market. In our durable-goods setting, the incentive for self-sabotage arises from the seller's commitment problem with period-one buyers (the so-called Coase conjecture). Interestingly, we also find that this sort of self-sabotage can not only be profit enhancing for the uncommitted firm, but may also increase social welfare (in contrast to the earlier models on self-sabotage.)

Date: 2014
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/13571516.2014.903109 (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: https://EconPapers.repec.org/RePEc:taf:ijecbs:v:21:y:2014:i:2:p:231-243

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CIJB20

DOI: 10.1080/13571516.2014.903109

Access Statistics for this article

International Journal of the Economics of Business is currently edited by Eleanor Morgan

More articles in International Journal of the Economics of Business from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().