Storable good monopoly: The role of commitment

Paolo Dudine, Igal Hendel, Alessandro Lizzeri

    Research output: Contribution to journalArticle

    Abstract

    We study dynamic monopoly pricing of storable goods in an environment where demand changes over time. The literature on durables has focused on incentives to delay purchases. Our analysis focuses on a different intertemporal demand incentive. The key force on the consumer side is advance purchases or stockpiling. In the case of storable goods, the stockpiling motive has recently been documented empirically. We show that, in this environment, if the monopolist cannot commit, then prices are higher in all periods, and social welfare is lower, than in the case in which the monopolist can commit. This is in contrast with the analysis in the literature on the Coase conjecture.

    Original languageEnglish (US)
    Pages (from-to)1706-1719
    Number of pages14
    JournalAmerican Economic Review
    Volume96
    Issue number5
    DOIs
    StatePublished - Dec 2006

    ASJC Scopus subject areas

    • Economics and Econometrics

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