Rationing in a Durable Goods Monopoly
University of Bologna
Paolo G. Garella
University of Milan - Dipartimento di Scienze Economiche, Aziendali e Statistiche
RAND Journal of Economics, Vol. 30, No. 1
We offer a new explanation of equilibrium rationing. As is well known, a monopolist selling a durable good and not able to commit to a price sequence has an incentive to lower the price once the consumers with the greatest willingness to pay have bought, but this induces consumers to postpone purchases. We show that rationing reduces the incentive to lower future prices and may allow the monopolist to increase his discounted profit.
JEL Classification: D42, L12Accepted Paper Series
Date posted: February 24, 1999
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