Abstract
By using a durable-goods monopolist model, this paper investigates the timing of upgrades. I consider a three-period model where the monopolist can upgrade the product in the second and third periods by investing in R&D. I analyse the non-commitment and commitment cases. In the latter case, the decision on the timing of upgrades is made in the first period in advance. It is shown that the time-inconsistency problem causes the monopolist in the non-commitment case to release a new version more rapidly than in the commitment case. Moreover, even in the non-commitment case, the release of a new version can still be later than the optimum from the social viewpoint.
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