Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/245475 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9294
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
A durable good monopolist faces a continuum of heterogeneous customers who make purchase decisions by comparing present and expected price-quality offers. The monopolist designs a sequence of price-quality menus to segment the market. We consider the Markov Perfect Equilibrium (MPE) of a game where the monopolist is unable to commit to future price-quality menus. We obtain the novel results that (a) under certain conditions, the monopolist covers the whole market in the first period (even when a static Mussa-Rosen monopolist would not cover the whole market), because this is a strategic means to convince customers that lower prices would not be offered in future periods, and that (b) this can happen only under the stage-wise Stackelberg leadership assumption (whereby consumers base their expectations on the value of the state variable at the end of the period). Conditions under which MPE necessarily involve sequentially trading are also derived.
Subjects: 
product quality
durable good monopoly
second-degree price discrimination
Coase conjecture
JEL: 
C73
D42
L12
Document Type: 
Working Paper
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