The consensus among inflation watchers is that biases in official price indexes like the consumer price index overstate true inflation. We identify a new source of bias that works in the other direction. In particular, we use a simple dynamic model for durable goods—one type of good typically purchased intermittently—to derive equivalent variations and a true COL index. We show that, all else h...

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...

This note corrects an error in the analysis of Goering/Boyce (1999) and extends their results. In this way, it refutes the claim that the durability of rented products plays a decisive role for the second-best emission taxation under imperfect competition.

In this paper, we investigate the implications of non-separable preferences over durable and nondurable consumption for asset pricing tests when adjusting durable consumption is costly. In an economy without adjustment costs, in which a frictionless rental market exists for the durable good, the standard Euler equation with respect to nondurable consumption will hold for each individual agent a...

In some markets, firms can price-discriminate across consumers based on their purchasing history. In particular, when firms introduce an innovation to their product, they may offer an upgrade price to their former customers, and a switching price to poach some consumers from their rivals. In this paper I examine the existence of an equilibrium with consumer poaching in a durable-good market cha...

This paper presents a model in which a durable goods monopolist sells a product to two buyers. Each buyer is privately informed about his own valuation. Thus all players are imperfectly informed about market demand. We study the monopolist’s pricing behavior as players’ uncertainty regarding demand vanishes in the limit. In the limit, players are perfectly informed about the downward-sloping de...