A NOTE ON DURABLE GOODS MONOPOLISTS: COMMITMENT TO FORWARD COMPATIBILITY

This note re-examines the previous results on durable goods monopolists under the time inconsistency problem that the firm tends to make its goods less compatible as a “planned obsolescence” strategy in the presence of network effects. We find that the possibility of the commitment to forward compat...

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Bibliographic Details
Published in:Japanese economic review (Oxford, England) England), 2010-12, Vol.61 (4), p.558-564
Main Authors: LEE, SANG-HO, NIEM, LE DUC
Format: Article
Language:English
Subjects:
Commitments
Development Economics
Durable goods
Econometrics
Economic History
Economics
Forward compatibility
Macroeconomics/Monetary Economics//Financial Economics
Microeconomics
Monopolies
Note and Comment
Obsolescence
Profitability
Studies
Technology
Citations: Items that this one cites
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Summary:This note re-examines the previous results on durable goods monopolists under the time inconsistency problem that the firm tends to make its goods less compatible as a “planned obsolescence” strategy in the presence of network effects. We find that the possibility of the commitment to forward compatibility is profitable to the monopolist, depending upon the degree of technological progress and network effects. Therefore, contractual commitments that are frequently feasible and observed in real-world markets make the society better off.
ISSN:1352-4739
1468-5876
DOI:10.1111/j.1468-5876.2009.00506.x