Product innovation by a durable-good monopoly

Arthur Fishman, Rob Rafael

Research output: Contribution to journalArticlepeer-review

65 Scopus citations

Abstract

We consider a durable-good monopolist that periodically introduces new models, each new model representing an improvement upon its predecessor. We show that if the monopolist is able neither to exercise planned obsolescence (i.e., artificially shorten the life of its products) nor to give discounts to repeat customers, the rate of product introductions is too slow - in comparison with the social optimum. On the other hand, if the monopolist is able to artificially shorten the durability of its products or to offer price discounts to repeat customers, it can raise its profit and, at the same time, implement the social optimum.

Original languageEnglish
Pages (from-to)237-252
Number of pages16
JournalRAND Journal of Economics
Volume31
Issue number2
DOIs
StatePublished - 2000

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