Digital Durable Goods Monopoly: A Folk Theorem

Zihao Li

Papers from arXiv.org

Abstract: This paper develops a model of dynamic monopoly for digital durable goods characterized by two features: free disposability on the buyer side and zero marginal cost on the seller side. We demonstrate that when parties are sufficiently patient, the seller's equilibrium payoffs span a continuum ranging from the lowest buyer valuation to the static monopoly commitment payoff (subject to the constraint that the lowest-type buyer receives an efficient allocation). These findings illustrate how the structural properties of digital goods generate novel reputational effects and result in market indeterminacy. Theoretically, we distinguish between the forces driving optimal market-clearing profit and those driving market efficiency (or the Folk Theorem): the former arises from intratemporal price discrimination, while the latter stems from intertemporal price discrimination.

Date: 2025-07, Revised 2025-11
New Economics Papers: this item is included in nep-com, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2507.13137 Latest version (application/pdf)

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:arx:papers:2507.13137

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().