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Does a Second-Hand Market Limit a Durable Goods Monopolist's Market Power?

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Abstract

Deneckere and Liang (2008) show that Swanís independent result fails when the monopolist cannot commit to a price schedule. The ratio between the rate of depreciation and the discount rate affects monopolist's market power when there is a frictionless secondhand market. This paper analyzes the same underlying model, except that resale is not allowed, and the existence of a second-hand market enlarges the range of parameters for the monopolist equilibrium. The presence of substitutes from the second-hand market after selling to the low valuation consumers may make the freshly release price less competitive in the first place.

Suggested Citation

  • Meng-Yu Liang, 2019. "Does a Second-Hand Market Limit a Durable Goods Monopolist's Market Power?," IEAS Working Paper : academic research 19-A003, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    • Handle: RePEc:sin:wpaper:19-a003
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    File URL: https://www.econ.sinica.edu.tw/~econ/pdfPaper/19-A003(all).pdf
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    More about this item

    Keywords

    : durability; market power; second-hand market; Coase Conjecture;
    All these keywords.

    JEL classification:

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

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