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Durable goods monopoly with stochastic costs

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  • Ortner, Juan

    (Department of Economics, Boston University)

Abstract

I study the problem of a durable goods monopolist who lacks commitment power and whose marginal cost of production varies stochastically over time. I show that a monopolist with stochastic costs usually serves the different types of consumers at different times and charges them different prices. When the distribution of consumer valuations is discrete, the monopolist exercises market power and there is inefficient delay. When there is a continuum of types, the monopolist cannot extract rents and the market outcome is efficient.

Suggested Citation

  • Ortner, Juan, 2017. "Durable goods monopoly with stochastic costs," Theoretical Economics, Econometric Society, vol. 12(2), May.
    • Handle: RePEc:the:publsh:1886
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Seres, Gyula, 2019. "Uncertain Commitment Power in a Durable Good Monopoly," Discussion Paper 201-012, Tilburg University, Center for Economic Research.
    2. Z. Eddie Ning, 2021. "List Price and Discount in a Stochastic Selling Process," Marketing Science, INFORMS, vol. 40(2), pages 366-387, March.
    3. Francesc Dilmé, 2021. "The Role of Discounting in Bargaining with One-Sided Offers," ECONtribute Discussion Papers Series 063, University of Bonn and University of Cologne, Germany.
    4. Francesco Nava & Pasquale Schiraldi, 2019. "Differentiated Durable Goods Monopoly: A Robust Coase Conjecture," American Economic Review, American Economic Association, vol. 109(5), pages 1930-1968, May.
    5. Francesc Dilmé & Daniel Garrett, 2022. "A Dynamic Theory of Random Price Discounts," ECONtribute Discussion Papers Series 191, University of Bonn and University of Cologne, Germany.
    6. Dino Gerardi & Lucas Maestri & Ignacio Monzón, 2022. "Bargaining over a Divisible Good in the Market for Lemons," American Economic Review, American Economic Association, vol. 112(5), pages 1591-1620, May.
    7. Dilmé, Francesc, 2023. "Bargaining in small dynamic markets," Journal of Economic Theory, Elsevier, vol. 207(C).
    8. Doval, Laura & Skreta, Vasiliki, 2024. "Optimal mechanism for the sale of a durable good," Theoretical Economics, Econometric Society, vol. 19(2), May.
    9. Abreu, Dilip & Pearce, David G. & Stacchetti, Ennio, 2015. "One-sided uncertainty and delay in reputational bargaining," Theoretical Economics, Econometric Society, vol. 10(3), September.
    10. Ortner, Juan, 2023. "Bargaining with evolving private information," Theoretical Economics, Econometric Society, vol. 18(3), July.
    11. Brzustowski, Thomas & Georgiadis Harris, Alkis & Szentes, Balázs, 2023. "Smart contracts and the Coase conjecture," LSE Research Online Documents on Economics 117950, London School of Economics and Political Science, LSE Library.
    12. Seres, Gyula, 2019. "Uncertain Commitment Power in a Durable Good Monopoly," Other publications TiSEM bece5078-67ec-458b-807c-3, Tilburg University, School of Economics and Management.
    13. Seres, Gyula, 2019. "Uncertain Commitment Power in a Durable Good Monopoly," Other publications TiSEM 9d3c763b-0e8d-47c5-8b47-6, Tilburg University, School of Economics and Management.
    14. Yonatan Gur & Gregory Macnamara & Daniela Saban, 2022. "Sequential Procurement with Contractual and Experimental Learning," Management Science, INFORMS, vol. 68(4), pages 2714-2731, April.
    15. Fabio Antoniou & Raffaele Fiocco, 2023. "Storable Good Market With Intertemporal Cost Variations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(1), pages 361-385, February.
    16. Ortner, Juan, 2019. "A continuous-time model of bilateral bargaining," Games and Economic Behavior, Elsevier, vol. 113(C), pages 720-733.

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    More about this item

    Keywords

    Durable goods; Coase conjecture; stochastic costs; dynamic games;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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