Durable Goods Monopoly, Learning-by-doing and "Sleeping Patents"

Edward Kutsoati () and Jan Zabojnik ()

No 105, Discussion Papers Series, Department of Economics, Tufts University from Department of Economics, Tufts University

Abstract: We analyze a durable good monopolist's decision to adopt a new and more efficient technology that is readily available at no cost. After an initial period of learning by doing, the new technology can either lower the cost of production, or make the good more attractive to consumers. We show that for certain parameter values, the monopolist finds it optimal to continue using the inferior production technology. An implication for welfare purposes is that a durable good monopolist may hold onto a "sleeping patent" when its use is socially desirable. However, we also show that sometimes the monopolist innovates too much relative to the socially optimal level.

Date: 2001
New Economics Papers: this item is included in nep-com and nep-mic
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