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Durable Goods Theory for Real World Markets

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  • Michael Waldman

Abstract

The early 1970s witnessed three major advances in durable-goods theory--Swan (1970, 1971) and Sieper and Swan (1973) on optimal durability, Coase (1972) on time inconsistency, and Akerlof (1970) on adverse selection. This paper surveys durable goods theory starting with these three contributions, where much of the focus is on recent literature and on models that explain real-world phenomena. In addition to the ideas found in the contributions of Swan, Coase, and Akerlof, topics covered include why producers sometimes practice "planned obsolescence," the role of adverse selection in new-car leasing, and reasons for aftermarket monopolization.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/089533003321164985
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 17 (2003)
Issue (Month): 1 (Winter)
Pages: 131-154

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Handle: RePEc:aea:jecper:v:17:y:2003:i:1:p:131-154

Note: DOI: 10.1257/089533003321164985
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  30. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
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