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American Economic Review Vol. 96 No. 5 2006

Storable Good Monopoly: The Role of Commitment

Paolo Dudine1; Igal Hendel2; Alessandro Lizzeri3

1 International Monetary Fund, 700 19th Street, NW, Washington, DC 20431. · 2 Department of Economics, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208, and National Bureau of Economic Research. · 3 Department of Economics, New York University, 269 Mercer Street, New York, NY 10003, and Centre for Economic Policy Research.

Abstract

We study dynamic monopoly pricing of storable goods in an environment where demand changes over time. The literature on durables has focused on incentives to delay purchases. Our analysis focuses on a different intertemporal demand incentive. The key force on the consumer side is advance purchases or stockpiling. In the case of storable goods, the stockpiling motive has recently been documented empirically. We show that, in this environment, if the monopolist cannot commit, then prices are higher in all periods, and social welfare is lower, than in the case in which the monopolist can commit. This is in contrast with the analysis in the literature on the Coase conjecture.

DOI
10.1257/aer.96.5.1706
Volume
96
Issue
5
Pages
1706-1719
Language
en
Sources
openalex crossref bibtex:phds-export.bib

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