Storable Good Monopoly: The Role of Commitment
Igal Hendel, and
Alessandro Lizzeri. 2006. "Storable Good Monopoly: The Role of Commitment."
American Economic Review,
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. (JEL D21, D42, L12)
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