TABLE OF CONTENTS Recent literature on durability has developed in a number of directions, either by relaxing some of the assumptions underlying the Coase Stokey Bulow analyses, or by expanding the analysis framework and making it more relevant to real world goods and markets. The following paragraphs provide a brief description of a few papers from this literature, particularly in connection with the role of replacement sales and secondary markets and the introduction of new goods.
Bond and Samuelson (1984) studied the impact of product depreciation and replacement sales on a monopolist s choice of product durability. The authors also explored a form of precommitment (discussed previously in (A)) that would allow the monopolist to overcome the time inconsistency problem, which is for the firm to credibly constrain its production capacity, perhaps by installing a plant size which is limited and adjusted only at a prohibitive expense (Bond and Samuelson, 1984). Their results are consistent with the Coase Stokey Bulow analyses and findings.
Kahn (1986) took issue with Coase s claim that, in the absence of precommitment, a monopolist seller would act competitively, not in the long run but in the twinkling of an eye (Coase, 1972). Kahn first discussed the need for a continuous time framework to test whether Coase s conjecture holds and under what assumptions. [16] He then showed by relaxing two assumptions underlying Coase s result, namely the no barrier to transaction or the length of the trading period being zero [17] and constant marginal cost of production...
