industrial organization In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and market (economics), markets. Industrial organization adds real-world complic ...

and in particular

monopoly A monopoly (from Greek language, Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situati ...

theory, a durapolist or

durable good In economics, a durable good or a hard good or consumer durable is a good that does not quickly wear out or, more specifically, one that yields utility over time rather than being completely consumed in one use. Items like bricks could be consid ...

monopolist is a producer that manipulates the

durability Durability is the ability of a physical product to remain functional, without requiring excessive maintenance or repair, when faced with the challenges of normal operation over its design lifetime. There are several measures of durability in use, ...

of its product. The term was coined by antitrust scholar Barak Orbach. The concept is used to explain how durable good manufacturers overcome the durability problem of their products and persuade consumers to purchase new goods. The concept utilizes a monopolist to simplify explanations regarding product durability.Orbach, Barak (2004). "The Durapolist Puzzle: Monopoly Power in Durable-Goods Market". Yale Journal on Regulation (21): 67–118.

Overview

Once a durable-good manufacturer sells a product to a consumer, it faces a challenge to convince this consumer to purchase another good. A consumer needs one refrigerator, one razor, a limited number of shirts, and so forth. Durability, therefore, may mean limited prospects for businesses.

Ronald Coase Ronald Harry Coase (; 29 December 1910 – 2 September 2013) was a British economist and author. Coase received a bachelor of commerce degree (1932) and a PhD from the London School of Economics, where he was a member of the faculty until 1951. ...

argued that because of the durability problem a durable-good monopolist may not be able to exploit its market position and charge monopolistic prices. His thesis is known as the

Coase Conjecture The Coase conjecture, developed first by Ronald Coase, is an argument in monopoly theory. The conjecture sets up a situation in which a monopolist sells a durable good to a market where resale is impossible and faces consumers who have different ...

. The durability problem is not limited to "monopolists" in the strict sense of the term. It may happen in all markets for durable goods, although it is easier to understand it with a single seller. To overcome the durability problem, durable good manufacturers must persuade consumers to replace functioning products with new ones or to pay them money in other ways. Replacement of functioning goods refers to business strategies that persuade or force consumers to purchase new products. One category of strategies is contrived durability that refers to product design that intentionally shortens the

product lifetime Product lifetime or product lifespan is the time interval from when a product is sold to when it is discarded. Product lifetime is slightly different from service life because the latter consider only the effective time the product is used. It is ...

before it is released onto the market. In most instances, durability is built into a product by the manufacturer through its choices of inputs and production procedures. Another category of strategies refers is

planned obsolescence In economics and industrial design, planned obsolescence (also called built-in obsolescence or premature obsolescence) is a policy of planning or designing a product with an artificially limited useful life or a purposely frail design, so that ...

that refers to shortening the lifetime of a product after it is released onto the market. Under this strategy, the manufacturer “convinces” the consumer to replace an old product with a new one, thereby rendering the lifetime of the old product shorter than its actual useful lifetime. Annual style changes of cars and revised editions of textbooks are prime examples of planned obsolescence. Although contrived durability and planned obsolescence are different in many ways, they are often confused. Another strategy that is frequently used by durapolists is tying: a sale (or lease) of one product or service on condition that the buyer (or the lessee) take another product or service. Durable-good manufacturers tie to their durables non-durables and can boost profit. Razor and blades is favorite example.Picker, Randal (211). "The Razors-and-Blades Myth(s)". University of Chicago Law Review 78: 225–255. Durable-good manufacturers also use financing strategies (leasing, complex payment terms) to extract payments from consumers.

References

{{Reflist Market structure Monopoly (economics)

Overview

See also

References