Explain why with a durable good, the monopolist might prefer to commit to keep its selling price constant over time. Can you think of a way that the monopolist might be able to make a credible commitment to do this?

Consider a monopoly producer of a durable goods, such as a supercomputer. The good does not depreciate. Once consumers purchase the good from the monopolist, they are free to sell it in the “second hand” market. Often times in markets for new durable goods, one sees the following price pattern: The seller starts off charging high price but then lowers the price over time. Explain why with a durable good, the monopolist might prefer to commit to keep its selling price constant over time. Can you think of a way that the monopolist might be able to make a credible commitment to do this?

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