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Maintenance Commitments for Monopolized Goods

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  • Pu-Yan Nie

Abstract

This paper highlights the monopoly firms' commitments for goods requiring high maintenance expenditure, such as elevators, televisions and computers. A guarantee time limit model to maintain these special goods is presented in this paper. Based on this model, several types of commitments with different guarantee time limits are compared under monopoly conditions. This paper finds that the guarantee pattern has no effect on the monopoly firm's profits if all information is known to both the consumer and the monopolist. It is also shown that if a monopoly firm exaggerates its product quality claims in its advertisements, then it cannot meet its warranty guarantees. Industrial organizational theory is employed to analyze maintenance guarantees in this work.

Suggested Citation

  • Pu-Yan Nie, 2012. "Maintenance Commitments for Monopolized Goods," Prague Economic Papers, Prague University of Economics and Business, vol. 2012(1), pages 18-29.
    • Handle: RePEc:prg:jnlpep:v:2012:y:2012:i:1:id:408:p:18-29
    DOI: 10.18267/j.pep.408
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    Cited by:

    1. Nie, Pu-yan, 2013. "Duopoly quality commitment," Economic Modelling, Elsevier, vol. 33(C), pages 832-842.
    2. Nie, Pu-yan & Wang, Chan & Yang, Yong-cong, 2019. "Vertical integration maintenance commitments," Journal of Retailing and Consumer Services, Elsevier, vol. 47(C), pages 11-16.

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    More about this item

    Keywords

    price; market structure; game theory; industrial organization; maintain; commitment; guarantee;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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