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Depreciation erodes the coase conjecture

Karp, L. (1996) Depreciation erodes the coase conjecture European Economic Review, 40, (2), pp. 473-490. (doi:10.1016/0014-2921(95)00025-9).

Record type: Article


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.

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Published date: 1996
Keywords: coase conjecture, depreciation, multiple markov equilibria


Local EPrints ID: 32968
ISSN: 0014-2921
PURE UUID: 765cdd18-5851-48d3-9135-156107c1ab0f

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Date deposited: 22 Jun 2007
Last modified: 17 Jul 2017 15:54

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