Eventi del

22 2018 12:45
Sala riunioni 3.e4.sr03 - Via Roentgen, 1

Theory and Experiments Seminar Series

Differentiated Durable Goods: Monopoly and Competition

Francesco Nava (London School of Economics)

 

The talk will be based on one of the following two projects:

Differentiated Durable Goods Monopoly: A Robust Coase Conjecture

Abstract

The paper analyzes a durable goods 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 and 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.

Differentiated Durable Goods Competition: Market Entry and Market Power

Abstract

The paper establishes why market-entry and competition can increase the profit of an incumbent when the products sold by the entrant are differentiated. The results are developed for Markovian equilibria and do not rely on collusive strategies as in the seminal paper by Gul 1987. Instead, the result shows that the presence of a competitor may actually diminish the undercutting motive of the incumbent when product are suitably differentiated. We the apply these insights to Hotelling spatial competition model and show why durability may reduce product differentiation and increase efficiency to some extent.