DEPRECIATION ERODES THE COASE CONJECTURE

If a durable good monopolist produces at constant marginal costs and t he good depreciates, there exists a family of Strong Markov Perfect Eq uilibrium (SMPE). One member of this family entails instantaneous prod uction of the level of stock produced in a competitive equilibrium; th is is consistent with the Cease Conjecture. Other SMPE in the family e ntail steady-state production at a stock level lower than in the compe titive equilibrium. There may be a jump to these steady states, or the y may be approached asymptotically. Monopoly profits are positive in t hese equilibria, and the Cease Conjecture fails.