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Applied Economics Letters Volume 12, 2005 - Issue 7
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Original Articles

Quality choice, the Coase problem, and a fixed cost function of quality: a note

Tsuyoshi Toshimitsu
Pages 453-455 | Published online: 19 Aug 2006
 
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Abstract

Chi (Citation1999) shows that the durable-good monopolist facing the Coase problem not only over-supplies, but decreases the price per unit of quality, so that the high-demanded consumers do not postpone their purchase. The results derived by Chi are re-examined in the case of a fixed cost function of quality and it is shown that his results are sensitive to the cost function of quality.

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