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Author: | Morch, N.-H. Kuhn, K.-U. |
Title: | Coase versus Pacman: who eats whom in the durable-goods monopoly? |
Journal: | Journal of Political Economy
1995 : AUG, VOL. 103:4, p. 785-812 |
Index terms: | CONSUMER DURABLES MONOPOLY ECONOMICS |
Language: | eng |
Abstract: | In standard durable-goods monopoly models, both the set of buyers and the set of prices are assumed to be continua. If the set of buyers is finite , the perfectly discriminating monopoly outcome is a unique subgame perfect equilibrium when the seller is sufficiently patient. Introducing instead a smallest unit of account yields the Coasian outcome as a generally unique subgame perfect equilibrium for patient enough buyers. A folk theorem is obtained if both sets are finite. These results reflect a strategic disadvantage of having to make moves with a large impact on other players' payoffs. |
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