A Note on Welfare in the Durable-Goods Monopoly

Malueg, David A.; Solow, John L.

doi:10.2307/2554327

Cited by 17 publications

(15 citation statements)

References 5 publications

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“…Bulow (1982), Kahn (1986)). However, the literature shows that this result relies crucially on these assumptions (see for instance, Bulow (1982), Bond and Samuelson (1984), Bulow (1986) and Malueg and Solow (1989)). Malueg and Solow (1989), for example, show that the result that social welfare is higher when the monopolist cannot commit to a future schedule of production is not robust to changes from linear to kinked demands.…”

Section: Social Welfare: Endogenous Versus Exogenous Demandmentioning

confidence: 99%

“…However, the literature shows that this result relies crucially on these assumptions (see for instance, Bulow (1982), Bond and Samuelson (1984), Bulow (1986) and Malueg and Solow (1989)). Malueg and Solow (1989), for example, show that the result that social welfare is higher when the monopolist cannot commit to a future schedule of production is not robust to changes from linear to kinked demands. This paper shows that Malueg and Solow's result might change when the monopolist is also allowed to choose the variety to be produced, that is, when the kinked demand is determined endogenously.…”

Section: Social Welfare: Endogenous Versus Exogenous Demandmentioning

confidence: 99%

“…This paper shows that Malueg and Solow's result might change when the monopolist is also allowed to choose the variety to be produced, that is, when the kinked demand is determined endogenously. Malueg and Solow (1989) find that the existence of a kink in the rental demand may imply that the "social welfare may be raised or lowered by requiring the monopolist to sell, rather than rent, its output." In their analysis the kink and the shape of the demand curve are determined exogenously.…”

Section: Social Welfare: Endogenous Versus Exogenous Demandmentioning

confidence: 99%

“…It is very common in the durable goods monopolist literature to impose the existence of an exogenously given demand (see Bulow (1982Bulow ( , 1986, Kahn (1986), Malueg and Solow (1989)). However, firms frequently choose the variety of the good they will produce and, as a result, they determine their own demand.…”

Section: Introductionmentioning

confidence: 99%

“…The assumption that the variety is exogenously determined is implicit in the literature on durable goods, e.g. Malueg and Solow (1989).…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Choice of Product Variety for the Durable-goods Monopolist

Casado-Izaga¹,

Torre²

2002

J. Econ.

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This paper analyzes the strategic choice of variety by a monopolist seller of a durable good as a means to mitigate his commitment problem. The monopolist chooses his product variety with a goal of ensuring that a strong reduction in future prices will not be profitable because it allows the firm to attract few additional consumers. The main result that emerges from considering product variety as an endogenous variable is that, contrary to the case in which it is exogenously determined, social welfare is always higher when the monopolist cannot commit that when he can.JEL classification: D42, L12.

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