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The Coase Conjecture When the Monopolist and Customers have Different Discount Rates

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  • Tim Groseclose

    (George Mason University)

Abstract

One of the most famous and outstanding formalizations of the Coase Conjecture is by Gul et al. (J Econ Theory 39(1):155–190, 1986. https://doi.org/10.1016/0022-0531(86)90024-4 ) peculiarity of their model—as well as nearly all other examinations of the Coase Conjecture, including that by Coase himself—is that it assumes that the monopolist and customers have the same discount rate. I re-examine their model, while relaxing this restriction. Gul et. al. show that, if the (common) discount rate of the monopolist and customers approaches one, then the Coase Conjecture follows. I show that one only needs the discount rate of the customers to approach one for this to be true. I also show a second result: If the customers’ discount rate is fixed at a value less than one, while the monopolist’s discount rate approaches one, then the Coase Conjecture is guaranteed not to follow.

Suggested Citation

  • Tim Groseclose, 2025. "The Coase Conjecture When the Monopolist and Customers have Different Discount Rates," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 66(3), pages 349-365, March.
    • Handle: RePEc:kap:revind:v:66:y:2025:i:3:d:10.1007_s11151-024-09990-w
    DOI: 10.1007/s11151-024-09990-w
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    More about this item

    Keywords

    Coase Conjecture; Durable-goods monopoly; Bargaining;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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