Durable goods monopoly and quality choice

A simple two-period durable goods monopoly model with quality choice is examined. It is shown that a seller tends to offer durable output with a lower quality than a renter who in turn offers lower quality than the socially efficient level. These results are contrasted to earlier works on durability and quality. It is shown that the impact of product durability on the optimal quality chosen depends critically upon the interrelationship between durability and quality costs at the margin and quality's impact on the durable goods stream of service flows. (C) 2005 University of Venice. Published by Elsevier Ltd. All rights reserved.