Considering a model of discrete demand with two consumers, this article shows
that irrespective of the difference between the willingness to pay of
consumers with high and low incomes, if interest rates are low, a durable
goods monopolist has an advantage in discriminating prices over time. If the
difference in willingness to pay is limited and interest rates high, the
monopolist has an advantage in setting a price equal to the low-income
consumer?s willingness to pay. Finally, in the case of great difference in
willingness to pay and high interest rates, the monopolist has an advantage
in setting a price equal to the high-income consumer?s willingness to pay,
and not selling the durable good to the low-income consumer. The results show
that the Coase conjecture can fail if the difference in willingness to pay is
great, and interest rates are high.