We offer a new explanation of equilibrium rationing. As is well known, a monopolist selling a durable good and not able to commit to a price sequence has an incentive to lower the price once the consumers with the greatest willingness to pay have bought, but this induces consumers to postpone purchases. We show that rationing reduces the incentive to lower future prices and may allow the monopolist to increase his discounted profit
Rationing in a durable goods monopoly / V. Denicolò, P.G. Garella. - In: RAND JOURNAL OF ECONOMICS. - ISSN 0741-6261. - 30:1(1999), pp. 44-55.
Rationing in a durable goods monopoly
P.G. GarellaUltimo
1999
Abstract
We offer a new explanation of equilibrium rationing. As is well known, a monopolist selling a durable good and not able to commit to a price sequence has an incentive to lower the price once the consumers with the greatest willingness to pay have bought, but this induces consumers to postpone purchases. We show that rationing reduces the incentive to lower future prices and may allow the monopolist to increase his discounted profit
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