Interfering with secondary markets

Igal Hendel, Alessandro Lizzeri

    Research output: Contribution to journalArticle

    Abstract

    We present a model to address in a unified manner four ways in which a monopolist can interfere with secondary markets. In the model, consumers have heterogeneous valuations for quality so that used-good markets play an allocative role. Our results are the following: (1) In contrast to Swan's famous independence result, a monopolist does not provide socially optimal durability. (2) Allowing the monopolist to rent does not restore socially optimal durability and increases the monopolist's market power in the used market. However, forcing the monopolist to sell the goods may be a bad policy because it would lead to either lower output or lower durability. (3) The manufacturer benefits from a well functioning used-good market despite the fact that used goods provide competition for new goods. (4) The monopolist prefers to restrict consumers' abilities to maintain the good.

    Original languageEnglish (US)
    Pages (from-to)1-21
    Number of pages21
    JournalRAND Journal of Economics
    Volume30
    Issue number1
    StatePublished - Mar 1999

    Fingerprint

    Monopolist
    Secondary market
    Durability
    Market power
    Rent
    Functioning

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Hendel, I., & Lizzeri, A. (1999). Interfering with secondary markets. RAND Journal of Economics, 30(1), 1-21.

    Interfering with secondary markets. / Hendel, Igal; Lizzeri, Alessandro.

    In: RAND Journal of Economics, Vol. 30, No. 1, 03.1999, p. 1-21.

    Research output: Contribution to journalArticle

    Hendel, I & Lizzeri, A 1999, 'Interfering with secondary markets', RAND Journal of Economics, vol. 30, no. 1, pp. 1-21.
    Hendel I, Lizzeri A. Interfering with secondary markets. RAND Journal of Economics. 1999 Mar;30(1):1-21.
    Hendel, Igal ; Lizzeri, Alessandro. / Interfering with secondary markets. In: RAND Journal of Economics. 1999 ; Vol. 30, No. 1. pp. 1-21.
    @article{c6c7712e7207479cab2ba02057a43574,
    title = "Interfering with secondary markets",
    abstract = "We present a model to address in a unified manner four ways in which a monopolist can interfere with secondary markets. In the model, consumers have heterogeneous valuations for quality so that used-good markets play an allocative role. Our results are the following: (1) In contrast to Swan's famous independence result, a monopolist does not provide socially optimal durability. (2) Allowing the monopolist to rent does not restore socially optimal durability and increases the monopolist's market power in the used market. However, forcing the monopolist to sell the goods may be a bad policy because it would lead to either lower output or lower durability. (3) The manufacturer benefits from a well functioning used-good market despite the fact that used goods provide competition for new goods. (4) The monopolist prefers to restrict consumers' abilities to maintain the good.",
    author = "Igal Hendel and Alessandro Lizzeri",
    year = "1999",
    month = "3",
    language = "English (US)",
    volume = "30",
    pages = "1--21",
    journal = "RAND Journal of Economics",
    issn = "0741-6261",
    publisher = "Rand Journal of Economics",
    number = "1",

    }

    TY - JOUR

    T1 - Interfering with secondary markets

    AU - Hendel, Igal

    AU - Lizzeri, Alessandro

    PY - 1999/3

    Y1 - 1999/3

    N2 - We present a model to address in a unified manner four ways in which a monopolist can interfere with secondary markets. In the model, consumers have heterogeneous valuations for quality so that used-good markets play an allocative role. Our results are the following: (1) In contrast to Swan's famous independence result, a monopolist does not provide socially optimal durability. (2) Allowing the monopolist to rent does not restore socially optimal durability and increases the monopolist's market power in the used market. However, forcing the monopolist to sell the goods may be a bad policy because it would lead to either lower output or lower durability. (3) The manufacturer benefits from a well functioning used-good market despite the fact that used goods provide competition for new goods. (4) The monopolist prefers to restrict consumers' abilities to maintain the good.

    AB - We present a model to address in a unified manner four ways in which a monopolist can interfere with secondary markets. In the model, consumers have heterogeneous valuations for quality so that used-good markets play an allocative role. Our results are the following: (1) In contrast to Swan's famous independence result, a monopolist does not provide socially optimal durability. (2) Allowing the monopolist to rent does not restore socially optimal durability and increases the monopolist's market power in the used market. However, forcing the monopolist to sell the goods may be a bad policy because it would lead to either lower output or lower durability. (3) The manufacturer benefits from a well functioning used-good market despite the fact that used goods provide competition for new goods. (4) The monopolist prefers to restrict consumers' abilities to maintain the good.

    UR - http://www.scopus.com/inward/record.url?scp=0033421219&partnerID=8YFLogxK

    UR - http://www.scopus.com/inward/citedby.url?scp=0033421219&partnerID=8YFLogxK

    M3 - Article

    AN - SCOPUS:0033421219

    VL - 30

    SP - 1

    EP - 21

    JO - RAND Journal of Economics

    JF - RAND Journal of Economics

    SN - 0741-6261

    IS - 1

    ER -