We consider a monopolist who can commit to a price path when selling a good for which individual consumers demand at most one unit. Only if the monopolist can also commit to destroying unpurchased stock and the timing of stock release, can she earn more than a static monopolist. This additional commitment power has empirical relevance for a wide range of goods that we term 'durable services.' The inability to store output facilitates price discrimination by a durable services monopolist by permitting the credible threat of rationing. We detail sufficient conditions for a durable services monopolist to produce more than a static or durable goods monopolist produces.
ASJC Scopus subject areas
- Economics and Econometrics