In his classical model for a durable goods monopoly, Ronald Coase conjectured that a monopoly will never be able to charge a price above the equilibrium competitive price and the monopoly will end up forgoing dominant market power. Under certain circumstances, the ideas in the Coase conjecture break down, which we can see in the high-end fashion industry. In this paper, we will analyze some classical and modern contributions in the field of a durable goods monopolist. Based on the ideas of various contributors, we introduce a new model while less formidable vividly presents the complexity in the topic.

Author Bio

I am an international student from Nepal. While attending Simpson College for my undergraduate studies, I was able to conduct research on various topics on Game Theory with the mathematics department chair, Rick Spellerberg. Dr. Rick Spellerberg was my advisor and he is also acting as my sponsor for publication in the journal. Upon his recommendation, I was selected to receive honors degree in mathematics department. As a part of the degree requirement, I had to select an area of mathematics to perform a semester long research. Since I was also majoring in economics, I wanted to perform independent study in an area that would incorporate both mathematical ideas and economic theories. This paper is a result of such motivation and was completed on May of 2006. After the completion, I gave an hour long presentation at Simpson College to defend my ideas. Currently, I am enrolled in a doctorial program in economics at the University of Pittsburgh.