Another Perspective on Planned obsolescence: is there really too much Innovation?

Models of durable goods with network externalities that set instantaneously have emphasized that a monopolist selling those goods has too high an incentive to introduce new vintages of the durable good, to make previous vintages (already bought by consumers) obsolete. This is referred to as planned obsolescence. We examine the robustness of planned obsolescence to the inclusion of network externalities that set in with a lag. If externalities set in with a lag (however small), consumers have an incentive to wait for other consumers to adopt the new vintage first, and in the absence of any change in prices, that leads to inefficient delay in adoption. Combining the two types of incentives we show that the monopolist is able to overcome consumer's inertia and still generate planned obsolescence through both intratemporal and intertemporal price discrimination. However, if monopoly power is "short lived" (for example due to copying), we show that, depending on the parameters of the model, we could have both types of inefficiencies: planned obsolescence or delay. Delay is brought about because copying limits the ability of the monopolist to increase prices in the future and therefore gives consumers an incentive to wait for both the onset of the (lagged) externality effect and the reduction in price caused by copiers. Delay appears mainly when the externality effect is strong and the new vintage is a significant improvement over the existing durable good.Planned obsolescence, durable goods, lagged network externalities, monopoly, delay.

Cost effectiveness of R&D and the robustness of Strategic Trade Policy

This paper analyzes the incentives for governments to impose export subsidies when firms invest in a cost saving technology before market competition. Governments first impose an export subsidy or a tax. After observing export policy, firms invest in cost reducing R&D and subsequently compete in the market. Governments subsidize exports under Cournot competition. Under Bertrand competition, export subsidies are positive whenever R&D is suffciently cost-effective at reducing marginal costs, and negative otherwise. The trade policy reversal found in models without endogenous sunk costs disappears if R&D is sufficiently cost-effective. Output subsidies are more robust than implied by the recent literature.

Production externality and productivity of labor.

In this paper we consider two imperfectly competitive industries, with the polluting emissions from one industry harming the productivity of labor in the other. The polluting industry has to pay an environmental tax chosen by the government. In this framework, we analyze how the different organizational structure adopted by workers affect the environmental tax set by the government, total pollution emissions from the polluting industry and the productivity of workers in the industry that suffers the externality. We obtain that this depends on the degree to which pollution emissions from the polluting industry affects the marginal product of labor in the other industry.Production externality, productivity of labor, environmental taxes, imperfect competition, unionized labor.

Cost Effectiveness of R&D and the Robustness of Strategic Trade Policy

This paper analyzes the incentives for governments to impose export subsidies when firms invest in a cost saving technology before market competition. Governments first impose an export subsidy or a tax. After observing export policy, firms invest in cost reducing R&D and subsequently compete in the market. Governments subsidize exports under Cournot competition. Under Bertrand competition, export subsidies are positive whenever R&D is sufficiently cost-effective at reducing marginal costs,and negative otherwise.The trade policy reversal found in models without endogenous sunk costs disappears if R&D is sufficiently cost-effective. Output subsidies are more robust than implied by the recent literature.Product Differentiation,Strategic Trade Policy,Policy Reversals,R&D.

Cost effectiveness of R&D and the robustness of Strategic Trade Policy

This paper analyzes the incentives for governments to impose export subsidies when firms invest in a cost saving technology before market competition. Governments first impose an export subsidy or a tax. After observing export policy, firms invest in cost reducing R&D and subsequently compete in the market. Governments subsidize exports under Cournot competition. Under Bertrand competition, export subsidies are positive whenever R&D is sufficiently costeffective at reducing marginal costs, and negative otherwise. The trade policy reversal found in models without endogenous sunk costs disappears if R&D is sufficiently cost-effective. Output subsidies are more robust than implied by the recent literature.

Policy Synchronization and Staggering in a Dynamic Model of Strategic Trade

This paper studies steady-state, Markov-Perfect strategic trade policy when (infinitely lived) governments are committed to trade policy during two periods. We compare the case in which both governments choose their export subsidies in the same periods (synchronization) versus the case in which they set them in alternate periods (staggering). We find that, under Cournot competition, welfare is higher when both governments synchronize their choice of export-promoting policy, since export subsidies are lower (closer to the cooperative solution) than when governments set them sequentially. Retaliation is therefore stronger and more harmful when governments alternate as (temporary) Stackelberg leaders. Synchronization is the equilibrium of the pre-commitment game in which both governments choose when to set their export subsidies. These results are robust to having stochastic length of commitment period and to allowing predetermined but flexible choice of subsidies by both governments. We also analyze the results of policy-staggering under alternative modes of competition and the possibility of firms investing in R&D.Strategic Trade Policy, Retaliation, Markov Perfect Equilibria, Policy-Synchronization.