Abstract
In this paper, we reconsider the profitability of a durable-good monopoly when the seller's discount rate may be different from the buyers’. In an infinite-horizon continuous-time full-commitment model, the monopoly can achieve more than the static monopoly profit if and only if the seller is more patient than the buyers. Under this condition, the price function is strictly decreasing over time. These results remain valid in models with buyers arriving sequentially, where the seller may have only one unit to sell or can produce more at constant marginal cost.
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