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.

Item Type: Article
Digital Object Identifier (DOI): doi:10.1016/0014-2921(95)00025-9
ISSNs: 0014-2921 (print)
Related URLs:
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
ePrint ID: 32968
Accepted Date and Publication Date:
Date Deposited: 22 Jun 2007
Last Modified: 31 Mar 2016 11:59

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