DURABLE GOODS PRICE CYCLES: THEORY AND EVIDENCE FROM THE TEXTBOOK MARKET |
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| Authors: | ERIC W BOND TOSHIAKI IIZUKA |
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| Institution: | Bond: Joe L. Roby Professor, Department of Economics, Vanderbilt University, VU Station B#351819, Nashville, TN 37235. Phone 1‐615‐322‐2388, Fax 1‐615‐343‐8495, E‐mail eric.bond@vanderbilt.edu |
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| Abstract: | We study the pricing policy of a monopolist selling a durable good with the features of a textbook. We assume buyers differ in their valuation of the good and propensity to resell, and identify the possibility of a positive relationship between the quantity of used goods and the price of a new good, and also a higher price for new goods in the last period before a new edition is introduced. Our empirical analysis supports this model: textbook prices increase as the share of used textbooks increases and the end of the current edition approaches. (JEL D420, L120) |
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