Coasian Dynamics with Free Disposability and Zero Marginal Cost: Information Goods

This paper studies a durable goods monopoly with multiple provision levels, free disposability, and zero marginal cost. We establish a Folk-Theorem-type result: as parties become sufficiently patient, equilibrium seller payoffs contains an interval bounded below by the lowest-type buyer’s efficient surplus and above by the maximal static payoff under incentive-compatible mechanisms guaranteeing that type efficient provision. This multiplicity arises because free disposability and zero marginal cost render the efficient provision level non-unique. Our analysis demonstrates how structural features common in information goods can undermine the Coase conjecture.