Track 9
Durable Goods & Lifecycle
Pricing products that last: the Coase conjecture, leasing vs selling, planned obsolescence, launch strategies, and switching cost dynamics.
Durable Goods & the Coase Conjecture
Prove why a patient monopolist selling a durable good must eventually price at marginal cost, and explore how the discount factor determines the rate of price decline.
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Topics
Durable Goods & the Coase Conjecture
Why durable good monopolists lose all pricing power
Prove why a patient monopolist selling a durable good must eventually price at marginal cost, and explore how the discount factor determines the rate of price decline.
Leasing vs Selling
How leasing restores monopoly pricing power
Analyze why Xerox leased and did not sell photocopiers, compare profit under three regimes (lease, commitment sell, no-commitment sell), and see how subscription models solve the durable goods problem for software.
Planned Obsolescence
Strategic durability reduction under self-competition
Explore why a monopolist may deliberately under-provide durability relative to the social optimum, and see how the durability gap varies with discount factor and production costs.
Penetration vs Skimming
Pricing strategy for new product launches
Simulate new-product launch strategies — skim high then lower price versus penetrate low to build share — and see how learning curves, network effects, and competitive entry timing determine which strategy wins.
Switching Costs & Lock-in
Bargains then ripoffs in two-period markets
Model how switching costs create invest-then-harvest dynamics: firms price below cost to build a customer base in period one, then raise prices to capture locked-in customers in period two.