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Didier Laussel and Ngo Van Long
''Quality differentiation in durable goods monopoly always yields strictly positive profits''
( 2022, Vol. 42 No.2 )
A durable good monopolist can discriminate between buyers in each period by offering them a sequence of price-quality menus (second-degree price discrimination). We show that, contrary to the Coase conjecture for the homogeneous durable good monopoly, under vertical differentiation, when the consumers base their expectations on the size of the market at the end of each period, the profit of a monopolist that cannot commit to future price-quality menus is bounded below by a strictly positive value independent of the discount factor.
Keywords: product quality, durable good monopoly, second-degree price discrimination, Coase conjecture.
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
C7 - Game Theory and Bargaining Theory
Manuscript Received : Dec 15 2021 Manuscript Accepted : Jun 30 2022

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