Durable Goods with Quality Differentiation

22 Pages Posted: 29 Oct 2003

Date Written: September 2003

Abstract

What is the optimal strategy of a durable-goods monopolist that can offer goods in different qualities? This Paper provides an answer for the case where the market is segmented into low- and high-income buyers. If the monopolist can change their product and price policy sufficiently rapidly - which reduces their commitment power - we find that the whole market is served immediately. Low-quality goods may be sold below costs. These results are strikingly different to those obtained with non-durable goods and to those obtained if the durable good comes only in a single quality. In an extension we further employ our results to discuss how policies of restricted versioning fare differently with non-durable and durable goods.

Keywords: Price discrimination, screening, durable-goods monopolist, coase conjuncture

JEL Classification: C78, D42, D82

Suggested Citation

Inderst, Roman, Durable Goods with Quality Differentiation (September 2003). CEPR Discussion Paper No. 4047. Available at SSRN: https://ssrn.com/abstract=462741

Roman Inderst (Contact Author)

Goethe University Frankfurt ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessen 60629
Germany
+49 (69) 798-34601 (Phone)
+49 (69) 798-35000 (Fax)

HOME PAGE: http://www.wiwi.uni-frankfurt.de/en/departments/finance/lehrstuhl/prof-dr-roman-inderst/team

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