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Market structure, scrappage, and moral hazard

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URI: http://hdl.handle.net/10016/4985
ISSN: 0165-1765
DOI: 10.1016/j.econlet.2005.01.019
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market_esteban_EL_2005_ps.pdf (436.26 KB)
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2005
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Elsevier
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Abstract
In the presence of moral hazard, the optimal contract for a durable-goods monopolist is a lease with an option to buy. This contract is optimal regardless of the monopolist's ability to commit and creates inefficient scrappage.
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Monopoly, Moral hazard, Scrappage, Maintenance, Durability
Bibliographic citation
Economics Letters, (2005), 88 (2), p. 203-208
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