A Beautiful Theory Falls to Ugly Data - Marginal REVOLUTION
marginalrevolution.com
Real-world data finally puts the famous Coase Conjecture to a direct empirical test — and the elegant theory doesn't survive the collision.
Coase ConjectureMonopoly Pricing TheoryDurable Goods ModelEmpirical Economics
Theory Briefing
- The Coase Conjecture predicts durable-goods monopolists lose pricing power over time, but almost no real-world tests have ever been run.
- This study is one of the first direct empirical tests of the conjecture, moving beyond a handful of lab experiments to actual market data.
- The results suggest the theory's beautiful internal logic crumbles when confronted with messy real-world consumer and firm behavior.