Strategic consumers in a durable-goods monopoly

Abstract

This paper is aimed at exploring the dynamic game structure inherent to the durable-goods monopoly and the Coase conjecture. The problem is stated as a two-level dynamic game between the monopolist and n identical consumers embedded in a given aggregate demand. A two-period model close to Bulow’s model suggests that the monopsony power of the consumers could help the seller partly to avoid the intertemporal price discrimination; the continuous time problem is analysed in a two-level differential game framework. In this context, a direct proof of the Coase conjecture is given.