Optimal capital accumulation and durable goods production

Production Capacity for Durable Goods

Obsolescence of Durable Goods and Optimal Consumption

A durable purchased at time t 2 [0;1) provides a constant service ‡ow x0 in the interval [t; t + 1]. The price of the durable is reduced periodically: it is equal to p = p0=(1 + ) in the period of time [ ; + 1), 2 N, where 0. Assume that the interest rate equal to the rate of time preference: r = . Consider a consumer that at date t = 0 has no durable and a lifetime wealth w. His optimization p...

Obsolescence of durable goods and optimal purchase timing

Article history: Received 25 November 2013 Received in revised form 17 June 2015 Available online 13 July 2015 JEL classification: O33 O31 E22

Durable Goods and Conformity

Is the variety of products supplied in markets a reflection of the diversity of consumers’ preferences? In this paper, we argue that the distribution of durable goods offered in markets tends to be compressed relative to the distribution of consumers’ underlying preferences. In particular, there are strong incentives for conformity in markets for durable goods. The reason for conformity is natu...

Optimal Dynamic Choice of Durable and Perishable Goods

We analyze the life cycle consumption choice model for multiple goods, focusing on the distinction between durables and perishables. As an approximation of the fact that rather high transaction costs and market imperfections prevail inmarkets for used durables, we assume that investment in durables is irreversible. In contrast to the additive model with one perishable good, the optimal consumpt...