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.

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 Dynamic Durable Goods Monopoly and Market Power

Games ◽  
2020 ◽  
Vol 11 (2) ◽  
pp. 22
Author(s):  
Basak Altan
Keyword(s):  
Market Power ◽  
Discrete Time ◽  
Durable Goods ◽  
Infinite Horizon ◽  
Monopoly Power ◽  
Durable Good ◽  
Durable Goods Monopoly ◽  
Markov Perfect

We analyze a vertically differentiated market for an imperfectly durable good served by a monopolist in an infinite-horizon, discrete-time game. Our goal is to identify the Markov perfect stationary equilibria where the seller can maintain his monopoly power. We establish that the set of parameters supporting a monopoly outcome is larger when the seller offers different quality versions of the same product. Hence, our results suggest that, when the innate durability of a product is high, the seller should offer different quality versions of the product.

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)

Subjective Time Preference and Willingness to Pay for an Energy-Saving Durable Good

2001 ◽  
Vol 32 (3) ◽  
pp. 133-141 ◽  
Author(s):  
Gerrit Antonides ◽  
Sophia R. Wunderink
Keyword(s):  
Willingness To Pay ◽  
Energy Saving ◽  
Subjective Time ◽  
Durable Good ◽  
Discount Function ◽  
Hyperbolic Discount ◽  
The One ◽  
Two Parameter ◽  
Difference Effect ◽  
Better Than

Summary: Different shapes of individual subjective discount functions were compared using real measures of willingness to accept future monetary outcomes in an experiment. The two-parameter hyperbolic discount function described the data better than three alternative one-parameter discount functions. However, the hyperbolic discount functions did not explain the common difference effect better than the classical discount function. Discount functions were also estimated from survey data of Dutch households who reported their willingness to postpone positive and negative amounts. Future positive amounts were discounted more than future negative amounts and smaller amounts were discounted more than larger amounts. Furthermore, younger people discounted more than older people. Finally, discount functions were used in explaining consumers' willingness to pay for an energy-saving durable good. In this case, the two-parameter discount model could not be estimated and the one-parameter models did not differ significantly in explaining the data.

The Demand For Money in Pakistan: Reply (Notes and Comments)

1975 ◽  
Vol 14 (3) ◽  
pp. 370-375
Author(s):  
M. A. Akhtar
Keyword(s):  
Interest Rates ◽  
Money Demand ◽  
Strong Support ◽  
Physical Capital ◽  
Careful Examination ◽  
Demand For Money ◽  
Weak Support ◽  
Complementarity Hypothesis ◽  
The Difference ◽  
The One

I am grateful to Abe, Fry, Min, Vongvipanond, and Yu (hereafter re¬ferred to as AFMVY) [1] for obliging me to reconsider my article [2] on the demand for money in Pakistan. Upon careful examination, I find that the AFMVY results are, in parts, misleading and that, on the whole, they add very little to those provided in my study. Nevertheless, the present exercise as well as the one by AFMVY is useful in that it furnishes us with an opportunity to view some of the fundamental problems involved in an empi¬rical analysis of the demand for money function in Pakistan. Based on their elaborate critique, AFMVY reformulate the two hypo¬theses—the substitution hypothesis and the complementarity hypothesis— underlying my study and provide us with some alternative estimates of the demand for money in Pakistan. Briefly their results, like those in my study, indicate that income and interest rates are important in deter¬mining the demand for money. However, unlike my results, they also suggest that the price variable is a highly significant determinant of the money demand function. Furthermore, while I found only a weak support for the complementarity between money demand and physical capital, the results obtained by AFMVY appear to yield a strong support for that rela¬tionship.1 The difference in results is only a natural consequence of alter¬native specifications of the theory and, therefore, I propose to devote most of this reply to the criticisms raised by AFMVY and the resulting reformulation of the two mypotheses.

scholarly journals Not ‘my economy’: A political ethnographic study of interest in the economy

2021 ◽  
pp. 136914812110070
Author(s):  
Anna Killick
Keyword(s):  
Political Economy ◽  
Low Income ◽  
Ethnographic Study ◽  
Economic Conditions ◽  
Economic Issues ◽  
Political Events ◽  
Low Incomes ◽  
The Rich

Some political economists explain the apparent downplaying of the importance of economic issues in political events such as Brexit with reference to the growing anger or despair people on low incomes feel about the economy. This ‘everyday political economy’ article draws on an ethnographic study conducted between 2016 and 2018 with residents of an English city to explore what people think about the phenomenon of the economy. It reveals significant differences in how interested high- and low-income participants are in the economy and its role as a bedrock for welfare. Low-income participants are more negative about the economy, particularly contesting politicians’ claims that it is distinct from the human sphere, when they view it as controlled by the rich. However, reasoning is based on post-2008 crisis economic conditions, and any lack of interest in the economy may be more calculative and temporary than is often assumed.

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