Product Innovation by a Durable-Good Monpoly

Posted: 29 Jun 2000

See all articles by Arthur Fishman

Arthur Fishman

Bar-Ilan University - Department of Economics

Rafael Rob

University of Pennsylvania - Department of Economics

Abstract

We consider a durable-good monopolist that periodically introduces new models, each new model representing an improvement upon its predecessor. We show that if the monopolist is able neither to exercise planned obsolescence (i.e., artificially shorten the life of its products) nor to give discounts to repeat customers, the rate of product introductions is too slow - in comparison with the social optimum. On the other hand, if the monopolist is able to artificially shorten the durability of its products or to offer price discounts to repeat customers, it can raise its profit and, at the same time, implement the social optimum.

JEL Classification: L12

Suggested Citation

Fishman, Arthur and Rob, Rafael, Product Innovation by a Durable-Good Monpoly. RAND Journal of Economics, Vol. 31, No. 2, Available at SSRN: https://ssrn.com/abstract=228756

Arthur Fishman (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
972-3-531-8366 (Phone)
972 3 535 3180 (Fax)

Rafael Rob

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-6775 (Phone)
215-573-2057 (Fax)

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