Durable goods monopoly with stochastic costs

Abstract

Copyright © 2017 The Author. I study the problem of a durable goods monopolist who lacks commitment power and whose marginal cost of production varies stochastically over time. I show that a monopolist with stochastic costs usually serves the different types of consumers at different times and charges them different prices. When the distribution of consumer valuations is discrete, the monopolist exercises market power and there is inefficient delay. When there is a continuum of types, the monopolist cannot extract rents and the market outcome is efficient.