Durable goods with secondary markets

Abstract

This article captures the effects of secondary markets on the durable goods with game theory technology. Firstly, under monopoly in production, secondary markets both improve the producer’s profits and extend the market size. Secondly, to improve the profits, the producer launches the secondary markets although he/she undertakes a loss in the secondary markets. Thirdly, under large preference (wealth) difference, the producer prices as a type of luxury. Finally, the conditions about the producer pricing are identified. In summary, this article establishes the general framework of durable goods. The wealth difference is considered to analyze the effects of wealth on the demand of both the new product market and the secondary markets. The producer’s optimal decisions depend on the number of all types of consumers. Both the wealth difference and the number of all types of consumers jointly determine the price of new and used goods.