Durable-Goods Monopoly with Discrete Demand

Mark Bagnoli, Stephen W Salant and Joseph E Swierzbinski

Journal of Political Economy, 1989, vol. 97, issue 6, 1459-78

Abstract: The authors analyze a dynamic game between consumers and the sole seller of a durable good. Unlike previous analyses, they assume that there exists a finite collection of buyers rather than a continuum. None of the main conclusions of the literature on durable-goods monopoly survives this change in assumption. Coase's conjecture that a durable-goods monopolist cannot earn supracompetitive profits in the continuous-time limit, Bulow's proposition that renting a durable is always more profitable than selling it, and Stokey's proposition that precommitting to a time path of prices is always optimal are all false when the set of buyers is finite. Copyright 1989 by University of Chicago Press.

Date: 1989
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