Depreciation erodes the coase conjecture
Karp, L. (1996) Depreciation erodes the coase conjecture. European Economic Review, 40, (2), 473-490. (doi:10.1016/0014-2921(95)00025-9).
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If a durable good monopolist produces at constant marginal costs and the good depreciates, there exists a family of Strong Markov Perfect Equilibrium (SMPE). One member of this family entails instantaneous production of the level of stock produced in a competitive equilibrium; this is consistent with the Coase Conjecture. Other SMPE in the family entail steady-state production at a stock level lower than in the competitive equilibrium. There may be a jump to these steady states, or they may be approached asymptotically. Monopoly profits are positive in these equilibria, and the Coase Conjecture fails.
|Keywords:||coase conjecture, depreciation, multiple markov equilibria|
|Subjects:||H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
H Social Sciences > HA Statistics
|Divisions:||University Structure - Pre August 2011 > School of Social Sciences > Economics
|Date Deposited:||22 Jun 2007|
|Last Modified:||31 May 2011 23:53|
|Contact Email Address:||firstname.lastname@example.org|
|RDF:||RDF+N-Triples, RDF+N3, RDF+XML, Browse.|
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