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| Author: | Hendel, I. Lizzeri, A. |
| Title: | Interfering with secondary markets |
| Journal: | RAND Journal of Economics
1999 : SPRING, VOL. 30:1, p. 1-21 |
| Index terms: | Economic theory CONSUMER DURABLES Models Manufacturing Monopoly |
| Freeterms: | Secondary markets |
| Language: | eng |
| Abstract: | In the paper, a model is presented to address in unified manner 4 ways in which a monopolist can interfere with secondary markets. In the model, consumers have heterogeneous valuations for quality. The results are the following: 1. In contrast to Swan's (1970) famous independence result, a monopolist does not provide socially optimal durability. 2. Allowing the monopolist to rent does not restore socially optimal durability and increases the monopolist's market power in the used market. 3. The manufacturer benefits from well functioning used-good markets in spite of the fact that used goods provide competition for new goods. 4. The monopolist prefers to restrict consumers' abilities to maintain the good. |
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