Damaged durable goods, upgrades, and the coase conjecture
Author
Type :
Article
Publication Status :
Published
Access :
restrictedAccess
Abstract
This study analyzes a damaged-goods market for a perfectly durable good in an infinite-horizon, discrete-time game. We characterize Markov perfect equilibria of this game under different buyer upgrade possibilities as a function of the common discount factor, the length of the time period between successive price changes, and the quality levels of the goods. We establish that introducing a lower-quality good (or equivalently, damaging a good) works as a commitment device only if consumers holding a durable good cannot reenter the market. When a buyer can upgrade the product, we establish that for all parameter values the Coase conjecture survives.
Source :
Journal of Institutional and Theoretical Economics
Date :
2018-12
Volume :
174
Issue :
4
Publisher :
Mohr Siebeck
URI
http://hdl.handle.net/10679/6244https://www.mohrsiebeck.com/en/article/damaged-durable-goods-upgrades-andthe-coase-conjecture-101628093245618x15160188867245
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