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Intertemporal Price Discrimination in Frictionless Durable Goods Monopolies

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  • Kuhn, Kai-Uwe

Abstract

The author shows that small differences in quality and production costs between durables and nondurables in a product line allow a durable goods monopolist to intertemporally price discriminate even with continuous trading. In particular, a monopolist would want to both sell and rent out a durable to achieve price discrimination. This incentive to price discriminate simultaneously creates inefficient delay in the sale of the durable good, a finite trading period, and long-run efficiency of the market. The Coase conjecture fails because the nondurable good acts as an outside option that guarantees a minimum profit in the market for durables. Copyright 1998 by Blackwell Publishing Ltd

Suggested Citation

  • Kuhn, Kai-Uwe, 1998. "Intertemporal Price Discrimination in Frictionless Durable Goods Monopolies," Journal of Industrial Economics, Wiley Blackwell, vol. 46(1), pages 101-114, March.
    • Handle: RePEc:bla:jindec:v:46:y:1998:i:1:p:101-14
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    Cited by:

    1. Anita Rao, 2015. "Online Content Pricing: Purchase and Rental Markets," Marketing Science, INFORMS, vol. 34(3), pages 430-451, May.
    2. Mitraille, Sebastien & Eric Avenel, 2003. "Strategic delays of delivery, market separation and demand discrimination," Royal Economic Society Annual Conference 2003 155, Royal Economic Society.
    3. S. Huang & Y. Yang & K. Anderson, 2001. "A Theory of Finitely Durable Goods Monopoly with Used-Goods Market and Transaction Costs," Management Science, INFORMS, vol. 47(11), pages 1515-1532, November.
    4. Tian Xia & Richard Sexton, 2010. "Brand or Variety Choices and Periodic Sales as Substitute Instruments for Monopoly Price Discrimination," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(4), pages 333-349, June.
    5. Kim, Jae-Cheol & Kim, Min-Young & Chun, Se-Hak, 2014. "Property tax and its effects on strategic behavior of leasing and selling for a durable-goods monopolist," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 132-144.
    6. Goering, Gregory E., 2007. "Durability choice with differentiated products," Research in Economics, Elsevier, vol. 61(2), pages 105-112, June.

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