interfering with secondary markets 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

health care evaluation utilitarianism and distortionary taxes cost utility analysis cua and cost benefit analysis cba are methods to evaluate allocations of health care resources problems are raised for both methods when income taxes do not meet the first best optimum this paper explores the implications of three ways that taxes may fall short of this ideal first taxes may be distortionary second they may be designed and administered without reference to information that is used by providers of health care finally the share of tax revenue that is devoted to health care may be suboptimal the two methods are amended to account for these factors

the role and growth of new car leasing theory and evidence abstractthere has been substantial growth in rates of new car leasing over the last few decades building on recent theoretical research we construct a model of the leasing decision in which leasing mitigates adverse selection and reduces transaction costs but moral hazard limits its use in our model the prevalence of leasing is related to new car reliability which suggests that the recent growth in leasing is at least partly due to improvements in new car reliability we use this model to derive testable implications and then conduct an empirical analysis to investigate whether the operation of the new and used car markets is consistent with the predictions of this theoretical approach our empirical results support the theoretical predictions of our model in particular we provide direct evidence that leasing mitigates adverse selection and that an important factor in the growth in new car leasing rates has indeed been the growth of new car reliability

determinants of renewable energy adoption in china and india a comparative analysis this article examines the dynamic relationships among output carbon emission and renewable energy generation of india and china during the period 1972 to 2011 using a multivariate vector error correction model vecm the results for india reveal unidirectional short run causality from carbon emission to renewable energy generation and from renewable energy generation to output whereas in the long run the variables have bidirectional causality causalities in china give a rather different scenario with a short run unidirectional causality from output to renewable energy and from carbon emission to renewable energy generation in the long run for china unidirectional causality is found from output to renewable energy generation while bidirectional causality is found between carbon emission and renewable energy generation

resale and collusion in a dynamic market for semidurable goods the paper studies the incentives to form collusive agreements when goods can be traded in second hand markets it will be shown that such incentives crucially depend on the rate of depreciation of the durable good and on consumer heterogeneity the main contribution of the paper shows that an active second hand market may strengthen the incentives to collude as do policies that affect the functioning of the second hand market e g leasing policy and buy back it will also be argued that the oligopoly incentives to adopt strategies that strengthen collusion often differ from the monopoly incentives to increase profits

monopoly with endogenous durability abstract a multi period formulation for a durable good monopoly is developed where production and durability are decision variables when commitment to production is possible neither the level nor the depreciation rate of initial stock has an effect on the selected efficient degree of durability with time consistent production policy the optimal degree of durability is less than the efficient rate and typically increasing in the initial stock and initial degree of durability when a monopolist can switch at any time from an inefficient non durable to an efficient durable there exists a cutoff durability above which only the non durable will be produced otherwise the efficient durable will be produced

incentive to reduce crop trait durability to reduce the competition from farmers who self produce seed an inbred line seed producer can switch to nondurable hybrid seed in a two period model we investigate the impact of crop durability on self production pricing and switching decisions and we examine the impact of license fees paid by self producing farmers first in an inbred line seed monopoly model we find that the monopolist may produce technologically dominated hybrid seed in order to extract more surplus from farmers further the introduction of license fees improves efficiency second we study how the monopolist s behavior is affected by the entry of a nondurable hybrid seed producer we show that the inbred line seed producer might benefit from competing with a technologically dominated hybrid seed producer as this allows for consumers discrimination

leasing lemons and moral hazard abstract a number of recent papers have analyzed leasing in the new car market as a response to the adverse selection problem in the used car market originally explored in the seminal 1970 paper by george akerlof in this paper we consider a model characterized by both adverse selection as in these earlier papers and moral hazard concerning the maintenance choices of new car drivers we show that this approach provides explanations for a number of empirical findings concerning real world new and used car markets including that leasing has become more popular over time very high income new car drivers lease more and used cars that were leased when new sell for more than used cars that were purchased when new we also compare and contrast our approach to new car leasing with alternative approaches

consumer myopia standardization and aftermarket monopolization abstract in this paper i show that the standard bertrand competition argument does not apply when firms compete for myopic consumers who optimize period by period i develop the model in the context of aftermarket with overlapping generations of consumers simultaneous product offerings in the primary market and aftermarket establishes a price floor for the primary good this constraint prevents aftermarket rents from being dissipated by the primary market competition duopoly firms earn positive profits despite price competition with undifferentiated products nonetheless government interventions to reinforce aftermarket competition such as a standardization requirement may lead to the partial collapse of the primary market

relicensing as a secondary market strategy secondary markets in the information technology industry where used or refurbished equipment is traded have been growing steadily for original equipment manufacturers oems in this industry the importance of secondary markets has grown in parallel not only as a source of revenue but also because of their impact on these firms competitive advantage and market strategy recent articles in the press have severely criticized some oems who are perceived to be actively trying to eliminate the secondary market for their products other oems have policies that enhance their secondary markets the goal of this paper is to understand how an oem s incentives and optimal strategies vis a vis the secondary market are shaped contingent on her relative competitive advantage product characteristics and consumer preferences the critical trade off that we examine is whether the indirect benefit from maintaining an active secondary market the resale value effect can outweigh the potentially negative effect of the sales of used products at the expense of new product sales the cannibalization effect to that end we develop a durable good model where the oem can directly affect the resale value of her product through a relicensing fee charged to the buyer of the refurbished equipment we analyze the oem s strategy in both the monopoly and the duopoly cases characterize the optimal relicensing fee set by the oem and draw conclusions on the conditions that favor stimulating or deterring the secondary market this paper was accepted by candace a yano operations and supply chain management

adverse selection in the used car market evidence from purchase and repair patterns in the consumer expenditure survey we analyze adverse selection in the used car market using a new approach that considers a car as an assemblage of parts some with symmetric information and others with asymmetric information using data from the consumer expenditure survey and consumer reports we examine turnover and repair patterns we find evidence of adverse selection due to the conditions of the transmission engine and during colder months air conditioning and sorting due to the conditions of the vehicle body and during warmer months air conditioning our quantification exercises indicate that adverse selection may have a meaningful effect on trade volume and quality in the secondhand market

durable goods price cycles theory and evidence from the textbook market i introduction one of the features of the market for new textbooks is that the price of new textbooks is relatively inflexible over the life of an edition in the sense that it fails to decline as the end of an edition approaches this inflexibility seems surprising because the availability of used textbooks which are a close substitute for new textbooks rises as the textbook ages furthermore the willingness to pay of a purchaser of a new textbook who plans to resell the book should decline at the end of the edition as the introduction of a new edition will destroy the resale value of the previous edition both of these factors would be expected to put downward pressure on the price of the good as the edition ages our goal of this article is to develop a model of textbook pricing that is capable of explaining this price inflexibility over the life of an edition we model the textbook pricing decision as that of a monopoly seller of a durable good over the life of an edition of the good where the life of the edition is exogenously given at two periods and the introduction of a new edition kills off the used market for the previous edition we assume that the market for the good is made up of two types of consumers high valuation buyers who will keep the good and low valuation buyers who value the option of being able to resell the good in the used market after using the services of the good in the current period the willingness to pay of high valuation buyers will thus be constant over the life of an edition while that of the low valuation buyers will decline in the second period due to the elimination of the used market we show that this model may lead to an optimal price for the durable good that may either rise or fall over the life of an edition and identify two effects that influence the monopolist s pricing decision the first we refer to as the used goods supply effect which is the impact of the quantity of goods available in the used market on the optimal price of new goods in the second period we show that if the quantity of high valuation buyers is sufficiently low the price of new goods may be increasing in the quantity of used goods in the second period this results from the fact that the increased supply of used goods may reduce the elasticity of demand for new goods making it optimal for the monopolist to sell only to high valuation buyers in the second period the second effect is the potential for resale effect which is due to the fact that the ability to sell goods in the used market will raise the willingness to pay of low valuation buyers relative to that of high valuation buyers in the first period the combination of these two effects leads to the possibility that the monopolist will choose to sell to both types of buyers in the first period of the edition but to sell only to high valuation buyers in the second period our empirical analysis tests for the presence of used goods supply and potential for resale effects on the prices of new textbooks we utilize a panel dataset from college bookshops that contains price and quantity information for economics textbooks for each semester between 1997 and 2003 we estimate simple pricing equations with textbook fixed effects instrumental variables are also used to account for the potential endogeneity of a regressor we find that textbook prices increase as the share of used textbooks increases which is consistent with the presence of a used good supply effect in which the increased presence of used goods makes the demand curve for new goods less elastic we also find evidence that prices of the goods are higher in the last period of an edition controlling for the stock of used goods in the market this is consistent with the potential for resale effect our theoretical model can be distinguished from other work that has analyzed the optimal pricing problem for a monopoly seller of a durable good

managing new and differentiated remanufactured products we study a firm that makes new products in the first period and uses returned cores to make remanufactured products along with new products in future periods the remanufactured product is differentiated from the new product so the firm needs to choose differentiated prices we analyze the monopoly environment in two period multi period three four and five and infinite planning horizons and characterize the optimal remanufacturing and pricing strategy for the firm in the process we identify remanufacturing savings thresholds that determine the production and pricing strategy for the firm among other results we find counter to intuition that in a finite horizon multi period setting the optimal policy is not necessarily monotone in remanufacturing savings

pricing strategy quality signaling and entry deterrence abstract i investigate a pricing strategy that is aimed at deterring entry by applying a two period model of a durable goods monopolist there exists an incumbent that is of two types that is high and low quality types they differ in terms of their r d capabilities and the incumbent s type is assumed to be unknown to an entrant if the entrant decided to enter the market nash bertrand price competition ensues between the incumbent and the entrant i show that not only limit pricing but also prestige pricing signals the incumbent s quality type which serves to discourage entry in the prestige pricing the high quality type sells the products at an intentionally higher price i also show that although limit pricing is more desirable than prestige pricing from a social welfare viewpoint the incumbent can still choose prestige pricing

financing durable assets this paper studies the nancing of durable assets in a model with collateral constraints due to limited enforcement durability aects the ease of nancing we show that more durable assets require larger down payments of internal funds per unit of capital making them harder to nance because durability raises the price of an asset and hence the overall nancing need more than its collateral value thus nancial constraints have a bigger impact on purchases of more durable capital such as land structures and durable equipment this basic insight has implications for the choice between new and used capital technology adoption and the rent versus buy decision since new assets are more durable than used ones unconstrained borrowers buy new assets and sell them when they are used while constrained borrowers purchase used assets financial constraints inhibit technology adoption as constrained borrowers may adopt less durable low quality assets that are otherwise dominated technologies more durable assets are more likely to be rented given their larger nancing need legal enforcement aects trade in durable assets and technology adoption with weak legal enforcement economies being net importers of used assets and investing a larger fraction in less durable low quality assets

market structure scrappage and moral hazard abstract in the presence of moral hazard the optimal contract for a durable goods monopolist is a lease with an option to buy this contract is optimal regardless of the monopolist s ability to commit and creates inefficient scrappage

dynamic demand for new and used durable goods without physical depreciation the case of japanese video games we develop a new dynamic demand model for new and used durable goods and quantify the impact of used goods markets on producers profits and consumer welfare

durable goods leasing in the presence of exporting used products to an international secondary market abstract with the rapid growth of global trade used durable goods from wealthy countries increasingly find their way into the secondary market of less wealthy countries exporting used products to a physically separate market not only removes cannibalization for new products at home but also fetches additional revenue in this paper we investigate the implications of exporting used products to international secondary markets in the durable goods industry we find that such a practice may significantly stimulate new product lease on the home market an effect in which the market attractiveness and product quality are mutually reinforcing we discover that removing cannibalization pressure is more of a priority than generating additional revenue while exporting used products if the export is carried out by an agent who exports used products bought from oem original equipment manufacturer we observe the disadvantage of double marginalization in a channel structure which slows down export and causes quantity distortion and also reduces the effectiveness of government stimulus however if the agent and oem set export price based supply and demand equilibrium this reduces the quantity distortion one special characteristic of used products trade across borders is the involvement of governments on both sides of the border the government measures include penalties imposed on aging durable goods and trade barriers we find that legislation of penalizing used products on the domestic market can stimulate export but it does not have an intended effect of stimulating new products produced at home the channel structure worsens the problem

buying frenzies in durable goods markets we explain why a durable goods monopolist would like to create a shortage during the launch phase of a new product we argue that this incentive arises from the presence of a second hand market and uncertainty about consumers willingness to pay for the good consumers are heterogeneous and initially uninformed about their valuations but learn about them over time given demand uncertainty first period sales may result in misallocation and lead to active trading on the secondary market after the uncertainty is resolved trading on the second hand market will generate additional surplus this surplus can be captured by the monopolist ex ante because consumers are forward looking and the price they are willing to pay incorporates the product s resale value as a consequence when selling to uninformed consumers the monopolist faces the trade off between more sales today and a lower profit margin specifically because the product s resale value is negatively related to the stock of the good in the second hand market selling more units today will result in a lower equilibrium price of the product therefore the monopolist may find it optimal to create a shortage and ration consumers to the second period we characterize conditions under which the monopolist would like to restrict sales and generate buying frenzies

price and quality discrimination in durable goods monopoly with resale trading abstract we examine a durable goods monopolist s optimal dynamic price and product quality strategy when buyers are rational and can trade used durables among themselves in contrast to the usual credibility problem of the durable goods monopolist intertemporal quality discrimination introduces a time inconsistency problem of not raising prices against high valuation consumers who delay purchase for quality upgrades resale trading ameliorates this time inconsistency problem and allows the monopolist to effectively price discriminate especially when the buyers are patient the monopolist s optimal price and quality offers in the new good market exhibit complex dynamic patterns and new good prices can fall as product quality improves even in the absence of entry threats or learning economies initial quality distortions are followed by steady state quality allocations that are always efficient for the high valuation buyers but sometimes also for the marginal consumer types both the resale trading frequency and the price discount for secondhand goods are driven by the pace of strategic quality obsolescence in the new good market

imperfect durability and the coase conjecture this article considers a market served by a monopolist who sells a durable good that depreciates stochastically over time we show that there exist three types of stationary equilibria a coase conjecture equilibrium a monopoly equilibrium and a reputational equilibrium when the depreciation rate is low the coase conjecture equilibrium is the unique equilibrium for intermediate values of the depreciation rate all three equilibrium types coexist when the depreciation rate is high the monopoly equilibrium is the unique equilibrium consequently when selling a good of sufficiently low durability the monopolist does not lose any of her monopoly power furthermore the steady state output in the reputational equilibrium falls below the monopoly quantity hence in durable goods markets welfare losses due to monopoly power may be larger than in markets for perishables

is leasing greener than selling based on the proposition that leasing is environmentally superior to selling some firms have adopted a leasing strategy and others promote their existing leasing programs as environmentally superior to green their image the argument is that because a leasing firm retains ownership of the off lease units it has an incentive to remarket them or invest in designing a more durable product resulting in a lower volume of new production and disposal however leasing might be environmentally inferior because of the direct control the firm has over the off lease products which may prompt the firm to remove them from the market to avoid cannibalizing the demand for new products motivated by these issues we adopt a life cycle environmental impact perspective and analytically investigate if leasing can be both more profitable and have a lower total environmental impact we find that leasing can be environmentally worse despite remarketing all off lease products and greener than selling despite the mid life removal of off lease products our analysis also provides insights for environmental groups and entities that use different approaches to improve the environmental performance of business practices we show that imposing disposal fees or encouraging remanufacturing under some conditions can actually lead to higher environmental impact we also identify when educating consumers to be more environmentally conscious can improve the relative environmental performance of leasing this paper was accepted by j miguel villas boas marketing