On Tuesday, March 6 at 4.40 pm, room 3402 (Shabolovka str. 26) ICEF held the Research Seminar.
Speaker: Francesco Nava (LSE)
Theme: "Differentiated Durable Goods: Monopoly and Competition"
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The talk was based on the following two projects:
"Differentiated Durable Goods Monopoly: A Robust Coase Conjecture" joint with Pasquale Schiraldi
Abstract: The paper analyses a durable good monopoly problem in which multiple varieties can be produced and sold. A robust Coase conjecture establishes that the market eventually clears, that profits exceed static optimal market-clearing profits, and that profits converge to this lower bound in all stationary equilibria when prices can be revised instantaneously. In contrast to the one-variety case though, equilibrium pricing is neither efficient nor minimal (that is, equal to the maximum between marginal cost and the minimal value). Conclusions apply even when products can be scrapped albeit at possibly smaller mark-ups. If so, a novel motive for selling high cost products naturally emerges. Moreover, with positive marginal costs, cross-subsidization arises as a result of equilibrium pricing. The online appendix delivers insights on product design.
"Differentiated Durable Goods Competition: Market Entry and Market Power" joint with Pasquale Schiraldi
Abstract: The paper analyses the effects of market entry in a differentiated durable goods environment. Results establish when the profits of a monopoly incumbent increase as a result of market entry by a competitor selling a differentiated variety. When products are horizontally differentiated, the market power of the incumbent and its profit increase as a result of entry in all equilibria (including in stationary ones). When products are vertically differentiated, the converse holds an entry deteriorates market power. An extreme case is presented in which the incumbent gets zero profit when there is no entry, but achieves commitment monopoly profit when there is entry.
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