Tuesday, June 23, 2020
Does a Second-Hand Market Limit a Durable Goods Monopolist's Market Power?
|By:||Meng-Yu Liang (Institute of Economics, Academia Sinica, Taipei, Taiwan)|
|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.|