Capacity Constraints in Durable Goods Monopoly: Coase and Hotelling

John Boyce, Jeffrey Church and Lucia Vojtassak ()
Additional contact information
John Boyce: University of Calgary

No 2012-07, Working Papers from Department of Economics, University of Calgary

Abstract: We examine the effect of a capacity constraint on the profi ts of a durable goods monopoly (DGM) in a two-period model when rationing is efficient. For sufficiently high discount factors, output rises through time without a constraint and a constraint increases the DGM profi ts: it restricts production in the second period, thereby lowering expectations of future prices and the incentive for intertemporal substitution. For lower values of the discount factor, output falls through time without a constraint. Regardless of the discount factor a constraint that binds in both periods may also be profi table. It reduces output in both periods, leading consumers to expect higher prices in the second period and thus increasing market power and prices in the first period.

Date: 2012-08-08
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://econ.ucalgary.ca/sites/econ.ucalgary.ca.ma ... eChurchVojtassak.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

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:clg:wpaper:2012-07

Access Statistics for this paper

More papers in Working Papers from Department of Economics, University of Calgary Contact information at EDIRC.
Bibliographic data for series maintained by Department of Economics ().