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Author: Jae Hyon Nahm Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
While selling an existing product, a durable-goods monopolist may develop a new, improved product. The firm must consider the interaction between its intertemporal pricing and research and development (R&D) decisions. The interactions show a sharp dichotomy depending on pricing regimes. When it is optimal for the firm to continue to sell the old model along with the new model, the interactions disappear. However, when it is optimal for the firm to discontinue the sale of the old model after introducing the new model, the firm will face a time-inconsistency problem in its R&D decision.
Author: Jae Hyon Nahm Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
While selling an existing product, a durable-goods monopolist may develop a new, improved product. The firm must consider the interaction between its intertemporal pricing and research and development (R&D) decisions. The interactions show a sharp dichotomy depending on pricing regimes. When it is optimal for the firm to continue to sell the old model along with the new model, the interactions disappear. However, when it is optimal for the firm to discontinue the sale of the old model after introducing the new model, the firm will face a time-inconsistency problem in its R&D decision.
Author: Ramesh Shankar Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
When an improvable durable good (such as packaged software) saturates the market, the seller could be tempted to release new versions too frequently, hurting her profit. A novel contractual device, which we term as a Free New Version Rights warranty (Free NVR warranty), can help the seller overcome this temptation. In a two-period game-theoretic model involving a monopolist firm facing heterogeneous consumers, we derive conditions under which a rational monopolist can act suboptimally: she could face a commitment problem and offer the new version, even if doing so lowers her overall profit. Profit is hurt because when consumers expect a new version, (a) fewer consumers buy the initial version, and (b) the monopolist is forced to charge a lower price for the initial version. We show how the free NVR warranty, which requires the monopolist to offer consumers the right to receive the new version for free for a limited period, can solve her commitment problem. This is a new, surprising finding: by bundling new-version rights with the initial version, the monopolist at first appears to be denying herself future revenue. We derive conditions under which this apparently unprofitable action is optimal, which is our main contribution. When free NVR is offered, consumer surplus decreases and social surplus increases. This work extends prior literature on durable goods and the Coase conjecture to innovative durable goods with network externalities. The findings have important practical implications for firms selling new versions of innovative durable goods subject to network effects, as well as for their consumers.
Author: Jay Pil Choi Publisher: MIT Press ISBN: 0262033569 Category : Antitrust law Languages : en Pages : 353
Book Description
In this volume, specialists from the United States and the European Union examine conceptual and empirical issues involved in antitrust policy in light of recent developments in the field.
Author: Francesco Nava Publisher: ISBN: Category : Durable goods, Consumer Languages : en Pages : 46
Book Description
The paper analyzes a durable good monopoly problem in which multiple varieties can be produced and sold. A robust Coase conjecture establishes that the market eventually clears, that profits exceed static optimal market-clearing profits, and that profits converge to this lower bound in all stationary equilibria when prices can be revised instantaneously. In contrast to the one-variety case though, equilibrium pricing is neither efficient nor minimal (that is, equal to the maximum between marginal cost an the minimal value). Conclusions apply even when products can be scrapped albeit at possibly smaller mark-ups. If so, a novel motive for selling high cost products naturally emerges. Moreover, with positive marginal costs, cross-subsidization arises as a result of equilibrium pricing. The online appendix delivers insights on product design.
Author: Jae Hyon Nahm
Author: Jae Hyon Nahm
Author: In Ho Lee
Author: Jonghwa Lee
Author: Ramesh Shankar
Author: Jay Pil Choi
Author: Joel Sobel
Author: Joseph Emmett Harrington
Author: Werner Güth
Author: Francesco Nava
Author: Joseph Emmett Harrington