Bounds on the profitability of a durable good monopolist

Abstract

A durable good is a long-lasting good that can be consumed repeatedly over time, and a duropolist is a monopolist in the market of a durable good. Theoretically, less is known about durable goods than their more well-studied counterparts, consumable and perishable goods. It was quite startling, therefore, when Ronald Coase (1972) conjectured that a duropolist has no monopoly power at all! Specifically, a duropolist who lacks commitment power cannot sell the good above the competitive price if the time between periods approaches zero. The Coase conjecture was first proved by Gul et al. (1986) under an infinite time horizon model with non-atomic consumers. Remarkably, the situation changes dra..