Buying Frenzies in Durable-Goods Markets

We explain why a durable-goods monopolist would like to create a shortage in the marketplace.We argue that this incentive arises from the presence of a second-hand market and uncertainty about consumers' willingness to pay for the good. Consumers are heterogeneous in their valuations. Moreover, some consumers are initially uninformed about their valuations and learn about the valuations over time. Given demand uncertainty, rst period sales may result in misallocation and lead to active trading on secondary market after the uncertainty is resolved. We characterize conditions under which the monopolist would like to restrict sales and generate a buying frenzy