Product Durability in Markets with Consumer Lock-in

Langenberg, Tobias (Oktober 2009): Product Durability in Markets with Consumer Lock-in. SFB/TR 15 Discussion Paper No. 279

Abstract

This paper examines a two-period duopoly where consumers are locked-in by switching costs that they face in the second period. The paper's main focus is on the question of how the consumer lock-in affects the firms' choice of product durability. We show that firms may face a prisoners' dilemma situation in that they simultaneously choose non-durable products although they would have higher profits by producing durables. From a social welfare perspective, firms may even choose an inefficiently high level of product durability.

• Dokumententyp: Paper (Discussion Paper)
• Keywords: Consumer Lock-in, Product Durability, Duopoly
• Fakultät: Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems ; Sonderforschungsbereiche > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > A1 - Allokationsmechanismen in Organisationen und Märkten
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: L13, D21
• Sprache: Englisch
• ID: 13275