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Identifier to cite or link to this item: https://doi.org/10.15057/26970
Identifier to cite or link to this item: https://hdl.handle.net/10086/26970

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Title
PRICING OF COMPLEMENTARY GOODS AS AN IMPLICIT FINANCIAL ARRANGEMENT
Creator
Creator Name
LEE, JINHYUK LEE, JINHYUK
Affiliation
Affiliation Name
Ulsan National Institute of Science and Technology
Creator Name
PARK, JAEOK PARK, JAEOK
Affiliation
Affiliation Name
Yonsei University
Key Word
aftermarkets
complementary goods
consumer lock-in
durable goods
implicit
financial arrangements
JEL
L10
L15
D40
Abstract
This paper studies the common pricing practice of firms selling a durable good at a low price and a complementary consumable good at a high price. In our model, consumers discount future payments while firms receive a steady-state flow of revenues from selling the durable and consumable goods. As a result, there are potential gains from deferring consumers' payments to the future. We show that when firms commit to constant prices and consumer lock-in is possible, firms choose pricing consistent with the practice in monopoly and competition. Our result provides a new efficiency argument in the aftermarket literature.
Publisher
Hitotsubashi University
Issued Date
2014-12
Language
English(eng)
Resource Type
departmental bulletin paper
Version Type
VoR
selfDOI
10.15057/26970
ISSN
0018-280x
NCID
AA00207547
Source Title
Hitotsubashi Journal of Economics
Volume Number
55
Issue Number
2
Page Start
207
Page End
228
Appears in Collections
Vol. 55, no. 2 (Dec. 2014)
URL
https://hdl.handle.net/10086/26970