TYING, COMPATIBILITY AND PLANNED OBSOLESCENCE <link rid="fn40">-super-* </link>
According to the hypothesis of planned obsolescence, a durable goods monopolist without commitment power has an excessive incentive to introduce new products that make old units obsolete, and this reduces its overall profitability. In this paper, I reconsider the above hypothesis by examining the role of competition in a monopolist's upgrade decision. I find that, when a system add-on is competitively supplied, a monopolist chooses to tie the add-on to a new system that is only backward compatible, even if a commitment of not introducing the new system is available and socially optimal. Tying facilitates a price squeeze. Copyright 2010 The Author. The Journal of Industrial Economics 2010 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.
Year of publication: |
2010
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Authors: | MIAO, CHUN-HUI |
Published in: |
Journal of Industrial Economics. - Wiley Blackwell. - Vol. 58.2010, 3, p. 579-606
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Publisher: |
Wiley Blackwell |
Saved in:
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