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Existence of stationary equilibrium in the markets for new and used durable goods

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  • Konishi, Hideo
  • Sandfort, Michael T.

Abstract

We prove the existence of stationary equilibrium in the primary and secondhand markets for an indivisible consumer durable in a general model with stochastic degradation and endogenous scrappage decisions. Unlike Rust (1985), we introduce transaction costs in the model as a motivation for consumer holdings of durables across multiple quality levels. In addition, we allow for multiple types of durables (e.g., Porsche and BMW). Since we use a fixed point theorem in making the existence argument, we do not need to invoke the single-crossing property on consumer tastes.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 26 (2002)
Issue (Month): 6 (June)
Pages: 1029-1052

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Handle: RePEc:eee:dyncon:v:26:y:2002:i:6:p:1029-1052

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  1. Anderson, Simon P. & Ginsburgh, Victor A., 1994. "Price discrimination via second-hand markets," European Economic Review, Elsevier, vol. 38(1), pages 23-44, January.
  2. Alessandro Lizzeri & Igal Hendel, 1999. "Adverse Selection in Durable Goods Markets," American Economic Review, American Economic Association, vol. 89(5), pages 1097-1115, December.
  3. Rust, John, 1985. "Stationary Equilibrium in a Market for Durable Assets," Econometrica, Econometric Society, vol. 53(4), pages 783-805, July.
  4. Mas-Colell, Andreu, 1975. "A model of equilibrium with differentiated commodities," Journal of Mathematical Economics, Elsevier, vol. 2(2), pages 263-295.
  5. Hart, Sergiu & Hildenbrand, Werner & Kohlberg, Elon, 1974. "On equilibrium allocations as distributions on the commodity space," Journal of Mathematical Economics, Elsevier, vol. 1(2), pages 159-166, August.
  6. Liebowitz, S J, 1982. "Durability, Market Structure, and New-Used Goods Models," American Economic Review, American Economic Association, vol. 72(4), pages 816-24, September.
  7. Jovanovic, Boyan & Rosenthal, Robert W., 1988. "Anonymous sequential games," Journal of Mathematical Economics, Elsevier, vol. 17(1), pages 77-87, February.
  8. Mas-Colell, Andreu, 1984. "On a theorem of Schmeidler," Journal of Mathematical Economics, Elsevier, vol. 13(3), pages 201-206, December.
  9. Manski, Charles F., 1983. "Analysis of equilibrium automobile holdings in Israel with aggregate discrete choice models," Transportation Research Part B: Methodological, Elsevier, vol. 17(5), pages 373-389, October.
  10. Judd, Kenneth L., 1985. "The law of large numbers with a continuum of IID random variables," Journal of Economic Theory, Elsevier, vol. 35(1), pages 19-25, February.
  11. Bresnahan, Timothy F., 1981. "Departures from marginal-cost pricing in the American automobile industry : Estimates for 1977-1978," Journal of Econometrics, Elsevier, vol. 17(2), pages 201-227, November.
  12. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  13. Bond, Eric W, 1983. "Trade in Used Equipment with Heterogeneous Firms," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 688-705, August.
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Cited by:
  1. Ernő Kovács & Zsuzsanna Lőke & Ibolya Bokor, 2007. "Trade of second-hand products, as a means of social emergence in the European Union and Hungary," Acta Universitatis Bohemiae Meridionalis, University of South Bohemia in Ceske Budejovice, vol. 10(1), pages 37-42.
  2. Pasquale Schiraldi, 2008. "Automobile replacement: a dynamic structural approach," LSE Research Online Documents on Economics 21780, London School of Economics and Political Science, LSE Library.

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