Consider a monopoly producer of a durable good, such as a supercomputer. The good does not depreciate.
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Consider a monopoly producer of a durable good, such as a supercomputer. The good does not depreciate. Once consumers purchase the good from the monopolist, they are free to sell it in the “secondhand” market. Often in markets for new durable goods, one sees the following pricing pattern: The seller starts off charging a high price but then lowers the price over time. Explain why, with a durable good, the monopolist might prefer to commit to keep its selling price constant over time. Can you think of a way that the monopolist might be able to make a credible commitment to do this?
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Related Book For
Economics Of Strategy
ISBN: 9781118273630
6th Edition
Authors: David Besanko, David Dranove, Scott Schaefer, Mark Shanley
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