Commitment Power in a Non-Stationary Durable-Good Market

José María Usategui Díaz de Otalora

No 1134-8984, BILTOKI from Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística)

Abstract: This paper derives and evaluates the decisions of a durable good monopolist in a context where demand for the services of the durable good changes over time. It shows that, if the size of the market decreases over time, social welfare may be higher when the monopolist has commitment ability than when she has not. Moreover, the equilibrium under a monopolist seller with commitment power may Pareto-dominate the equilibrium under a monopolist seller without commitment ability. The work also proves that these results obtain if there is uncertainty about future demand for the services of the durable good.

Keywords: durable goods; commitment ability; demand variations; monopoly (search for similar items in EconPapers)
Date: 2001-05
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Dpto. de Econometría y Estadística, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain

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