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The Timing of Upgrades

The Timing of Upgrades Abstract By using a durable-goods monopolist model, this paper investigates the timing of upgrades. I consider a three-period model where the monopolist can upgrade the product in the second and third periods by investing in R&D. I analyse the non-commitment and commitment cases. In the latter case, the decision on the timing of upgrades is made in the first period in advance. It is shown that the time-inconsistency problem causes the monopolist in the non-commitment case to release a new version more rapidly than in the commitment case. Moreover, even in the non-commitment case, the release of a new version can still be later than the optimum from the social viewpoint. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Japanese Economic Review Springer Journals

The Timing of Upgrades

The Japanese Economic Review , Volume 62 (1): 10 – Mar 1, 2011

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References (25)

Publisher
Springer Journals
Copyright
2010 Japanese Economic Association
ISSN
1352-4739
eISSN
1468-5876
DOI
10.1111/j.1468-5876.2010.00510.x
Publisher site
See Article on Publisher Site

Abstract

Abstract By using a durable-goods monopolist model, this paper investigates the timing of upgrades. I consider a three-period model where the monopolist can upgrade the product in the second and third periods by investing in R&D. I analyse the non-commitment and commitment cases. In the latter case, the decision on the timing of upgrades is made in the first period in advance. It is shown that the time-inconsistency problem causes the monopolist in the non-commitment case to release a new version more rapidly than in the commitment case. Moreover, even in the non-commitment case, the release of a new version can still be later than the optimum from the social viewpoint.

Journal

The Japanese Economic ReviewSpringer Journals

Published: Mar 1, 2011

Keywords: economics, general; microeconomics; macroeconomics/monetary economics//financial economics; econometrics; development economics; economic history

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