Debt implications in durable goods monopolists

This study shows a new approach to Coase conjecture, considering the effect of debt on the strategy of a durable goods monopoly. We demonstrate that, in the monopoly context, considering perfect information about demand and costs, the increased probability of bankruptcy, as a consequence of higher level of debt, lessens the decreasing tendency of the price of durable goods, slowing down the approach of the price to the marginal cost, this effect being greater in proportion to the greater difference between consumers’ readiness to pay. We also demonstrate that the greater likelihood of bankruptcy, a consequence of increased debt, means a greater possibility of the monopolist wanting to sell a unit of durable goods in each period, this possibility being greater in proportion to a greater difference between consumers’ readiness to pay.