On durable goods monopolies and the Coase-Conjecture

1998 ◽  
Vol 3 (3) ◽  
pp. 215-236 ◽  
Author(s):  
Werner Güth ◽  
Klaus Ritzberger
Keyword(s):  
Durable Goods ◽  
Coase Conjecture

The Pollution Haven Paradox: Can an Effluent Tax Improve both Profits and Welfare?

2007 ◽  
Vol 7 (1) ◽  
Author(s):  
Robert Driskill ◽  
Andrew W. Horowitz
Keyword(s):  
Low Income ◽  
Durable Goods ◽  
Time Consistency ◽  
Low Income Countries ◽  
Environmental Taxes ◽  
Durable Good ◽  
Lump Sum ◽  
Pollution Haven ◽  
Coase Conjecture ◽  
Future Supply

Abstract Stringent environmental taxes in high-income countries are assumed to drive dirty industries to low-income countries, but the empirical evidence for ``pollution havens" is surprisingly weak. We demonstrate that a government trying to prevent flight by a ``dirty" durable good monopolist can impose an effluent tax that is offset by a lump-sum subsidy so that both firm profits and host-country welfare are increased. The scheme exploits the Coase Conjecture insight: a durable goods monopolist has a time-consistency dilemma that limits its ability to restrict future output. In this environment the effluent tax provides a credible commitment that restricts future supply. We assert that the use of lump-sum subsidies in strategic location competition is consistent with this mechanism, and this paradigm may be an important piece of the ``pollution haven paradox."

scholarly journals Differentiated Durable Goods Monopoly: A Robust Coase Conjecture

2019 ◽  
Vol 109 (5) ◽  
pp. 1930-1968 ◽  
Author(s):  
Francesco Nava ◽  
Pasquale Schiraldi
Keyword(s):  
Lower Bound ◽  
Marginal Cost ◽  
Durable Goods ◽  
Market Clearing ◽  
Durable Goods Monopoly ◽  
Coase Conjecture ◽  
Cross Subsidization

The paper analyzes a durable goods monopoly problem in which multiple varieties can be sold. A robust Coase conjecture establishes that the market eventually clears, with profits exceeding static optimal market-clearing profits and converging to this lower bound in all stationary equilibria with instantaneous price revisions. Pricing need not be efficient, nor is it minimal (equal to the maximum of marginal cost and minimal value), and can lead to cross-subsidization. Conclusions nest both classical Coasian insights and modern Coasian failures. The option to scrap products does not affect results qualitatively, but delivers a novel motive for selling high cost products. (JEL C78, D42, L12)

scholarly journals Pricing strategy in the context of durable goods monopoly with discrete demand

2015 ◽  
Vol 60 (204) ◽  
pp. 61-73
Author(s):  
Paulo Nunes
Keyword(s):  
Willingness To Pay ◽  
Interest Rates ◽  
Low Income ◽  
Durable Goods ◽  
Pricing Strategy ◽  
Durable Good ◽  
Durable Goods Monopoly ◽  
Coase Conjecture ◽  
Low Incomes ◽  
The Difference

Considering a model of discrete demand with two consumers, this article shows that irrespective of the difference between the willingness to pay of consumers with high and low incomes, if interest rates are low, a durable goods monopolist has an advantage in discriminating prices over time. If the difference in willingness to pay is limited and interest rates high, the monopolist has an advantage in setting a price equal to the low-income consumer?s willingness to pay. Finally, in the case of great difference in willingness to pay and high interest rates, the monopolist has an advantage in setting a price equal to the high-income consumer?s willingness to pay, and not selling the durable good to the low-income consumer. The results show that the Coase conjecture can fail if the difference in willingness to pay is great, and interest rates are high.

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