Durable-Goods Monopoly: Laboratory Market and Bargaining Experiments

Abstract

Introduction n In a seminal article, Ronald Coase (1972) pointed out how product durability may limit a seller's monopoly power. A prospective durable-good consumer who expects decreasing price offers over time would be willing to wait to purchase as long as the expected gain from the price decrease exceeds the opportunity cost of waiting to purchase. This may induce a monopoly seller to set relatively low prices. This line of argument led Coase to propose what has come to be known as the Coase conjecture. If the product is perfectly durable and if consumers are sufficiently patient, then monopoly prices will converge to marginal cost almost instantaneously. The significance of product durability and monopoly power was recognized even before Coase's article. Major U.S. antitrust cases such as U.S. v. Aluminum Co. of America (1945) and U.S. v. United Shoe Machinery Corp. (1953) and criminal and civil antitr

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