A Beautiful Theory Falls to Ugly Data

My latest paper, A Test of the Coase Conjecture Using Prices of Electronic Books, with the excellent Tim Groseclose, has just been published. The Coase Conjecture is another one of Coase’s little ideas — the original paper is six pages — that has spawned hundreds of follow-up papers and thousands of citations. The idea is simple. A monopolist of a durable good has a time-inconsistency problem. Set the monopoly price in period 1 and he will be tempted in period 2 to cut the price and mop up the c...