Durability in a Monopoly with a Small Number of Buyers.

This paper shows that the number of buyers is a crucial demand characteristic for a monopolist's choice of durability. When he sells to a few large buyers, he offers a more durable good than when selling to many small buyers. By increasing durability of the good sold to large buyers, the monopolist encourages current purchasing and can thus engage in greater intertemporal price discrimination and make more profit. Therefore Bulow's proposition of minimal durability does not survive in the case of few buyers. This has not been pointed out thus far. Copyright 1999 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia