Why would a durable good monopolist also produce a cost-inefficient nondurable good?

Abstract

We develop both commitment and time-consistent stationary policies for a monopolist who produces a mixture of goods distinguished by production costs and degree of durability. Under commitment, only the cost-efficient durable good is produced and the monopoly output is realized each period. For the time-consistent stationary case, there is an interval for the degree of durability where only the durable good is produced and a higher, non-overlapping interval where both the cost-efficient durable and the cost-inefficient nondurable good are produced. For any period length, when the degree of durability is such that both durable and nondurable goods are provided, combined output is less than the competitive output and decreases in the degree of durability, approaching the single-period monopoly output. When both goods are produced, the Coase conjecture does not hold.