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Choice of Product Variety for the Durable-goods Monopolist

Author

Listed:
  • F. Javier Casado-Izaga

    (Department of Economics, University of País Vasco, Avenida L. Aguirre 83, E-48015 Bilbao, Spain (e-mail: jepcaizf@bs.ehu.es; jepsadea@bs.ehu.es))

  • Ana I. Saracho

    (Department of Economics, University of País Vasco, Avenida L. Aguirre 83, E-48015 Bilbao, Spain (e-mail: jepcaizf@bs.ehu.es; jepsadea@bs.ehu.es))

Abstract

This paper analyzes the strategic choice of variety by a monopolist seller of a durable good as a means to mitigate his commitment problem. The monopolist chooses his product variety with a goal of ensuring that a strong reduction in future prices will not be profitable because it allows the firm to attract few additional consumers. The main result that emerges from considering product variety as an endogenous variable is that, contrary to the case in which it is exogenously determined, social welfare is always higher when the monopolist cannot commit that when he can.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • F. Javier Casado-Izaga & Ana I. Saracho, 2002. "Choice of Product Variety for the Durable-goods Monopolist," Journal of Economics, Springer, vol. 76(1), pages 33-48, May.
    • Handle: RePEc:kap:jeczfn:v:76:y:2002:i:1:d:10.1007_s712-002-8219-3
    DOI: 10.1007/s712-002-8219-3
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    References listed on IDEAS

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    1. repec:bla:econom:v:54:y:1987:i:213:p:57-67 is not listed on IDEAS
    2. Kahn, Charles M, 1986. "The Durable Goods Monopolist and Consistency with Increasing Costs," Econometrica, Econometric Society, vol. 54(2), pages 275-294, March.
    3. Butz, David A, 1990. "Durable-Good Monopoly and Best-Price Provisions," American Economic Review, American Economic Association, vol. 80(5), pages 1062-1076, December.
    4. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
    5. Malueg, David A. & Solow, John L., 1987. "On requiring the durable goods monopolist to sell," Economics Letters, Elsevier, vol. 25(3), pages 283-288.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Keywords: durable goods monopolist; commitment; product variety.;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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