Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Saturday, October 31, 2009

Product Durability in Markets with Consumer Lock-in

Posted by D. Daniel Sokol

Tobias Langenberg (Free University of Berlin) has a new working paper on Product Durability in Markets with Consumer Lock-in.

ABSTRACT: This paper examines a two-period duopoly where consumers are locked-in by switching costs that they face in the second period. The paper's main focus is on the question of how the consumer lock-in affects the firms' choice of product durability. We show that firms may face a prisoners' dilemma situation in that they simultaneously choose non-durable products although they would have higher profits by producing durables. From a social welfare perspective, firms may even choose an inefficiently high level of product durability.

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