Re: investing in sabatoge

["Michael R. Ward" <ward1@ux6.cso.uiuc.edu>]

New editions of textbooks "sabotage" sales of older editions.  They may
include some marginal improvements, but perhaps their main purpose is to
alleviate the durable goods monopolist problem that publishers face
(competition with used books).  

Donald Campbell's book "Incentives" has a nice analysis of why a
manufacturer might discontinue (sabotage?) a profitable line (e.g. VW bug)
on 164-172.  Essentially, the line might be canablizing sales from an even
more profitable product.

The Pentium SX (I think) chip without the math coprocessor is a great
example.  The math coprocessor was actually installed, but was purposely
disabled.  I have considered this a pretty clear example of price
discrimination lowering consumer surplus more than it increases profits.
(Of course, in a dynamic analysis, the increased profits could have led to
more rapid innovation and greater consumer surplus.)

Mike

At 5/29/99 04:29 PM -0400, you wrote:
>I am interested in learning about examples of corporations investing in
>technologies to restrict the usefulness of their products.  Monsanto's
>terminator technology, for example, makes seeds less useful to farmers.
>I recall that IBM added circuitry to its PC Jr. to make it difficult to
>install a second hard time.  Microsoft is accused of similar mischief.
>--
>Michael Perelman
>Economics Department
>California State University
>Chico, CA 95929
>
>Tel. 530-898-5321
>E-Mail michael@ecst.csuchico.edu
>