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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Length: 20 pages Date of creation: 20 Jan 2000 Date of revision: Publication status: published, Journal of Economic Dynamics and Control, 26, 1029-1052 Handle: RePEc:boc:bocoec:450
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Jovanovic, Boyan & Rosenthal, Robert W., 1986.
"Anonymous Sequential Games,"
Working Papers
86-12, C.V. Starr Center for Applied Economics, New York University.
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