Differentiated Durable Goods Monopoly: A Robust Coase Conjecture

43 Pages Posted: 12 Mar 2016 Last revised: 30 Oct 2018

See all articles by Francesco Nava

Francesco Nava

London School of Economics & Political Science (LSE)

Pasquale Schiraldi

London School of Economics & Political Science (LSE) - Department of Economics

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Date Written: October 18, 2018

Abstract

The paper analyzes a durable goods monopoly problem in which multiple varieties can be sold. A robust Coase conjecture establishes that the market eventually clears, with profits exceeding static optimal market-clearing profits and converging to this lower bound in all stationary equilibria with instantaneous price revisions. Pricing need not be efficient, nor is it minimal (equal to the maximum of marginal cost and minimal value), and can lead to cross-subsidization. Conclusions nest both classical Coasian insights and modern Coasian failures. The option to scrap products does not affect results qualitatively, but delivers a novel motive for selling high cost products.

Keywords: Coase Conjecture, Monopoly, Product Design, Dynamic pricing

Suggested Citation

Nava, Francesco and Schiraldi, Pasquale, Differentiated Durable Goods Monopoly: A Robust Coase Conjecture (October 18, 2018). Available at SSRN: https://ssrn.com/abstract=2745961 or http://dx.doi.org/10.2139/ssrn.2745961

Francesco Nava

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Pasquale Schiraldi (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://sites.google.com/view/schiraldi-pasquale/home

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