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Decisions to Replace Consumer Durables Goods: An Econometric Application of Wiener and Renewal Processes

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Viviana Fernandez ()

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Abstract

Current sales of most consumer durable goods are accounted for by replacements. However, only in recent years has the economic literature provided a more rigorous analysis of replacement purchases by incorporating elements of dynamic programming and of the theory of stochastic processes.
This paper is an empirical study of household replacement decisions modeled as an optimal stopping rule. Using data from the ‘Residential Energy Consumption Survey’ (RECS) of the U.S. Department of Energy, we conclude that demographic variables, operation and replacement costs, and equipment characteristics may affect ownership spells of appliances such as electric heaters and central air conditioners.

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Paper provided by Centro de Economía Aplicada, Universidad de Chile in its series Documentos de Trabajo with number 87.

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Date of creation: 2000
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Handle: RePEc:edj:ceauch:87

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  1. Rust, John, 1985. "Stationary Equilibrium in a Market for Durable Assets," Econometrica, Econometric Society, vol. 53(4), pages 783-805, July. [Downloadable!] (restricted)
  2. Caballero, Ricardo J, 1994. "Notes on the Theory and Evidence on Aggregate Purchases of Durable Goods," Oxford Review of Economic Policy, Oxford University Press, vol. 10(2), pages 107-17, Summer.
  3. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September. [Downloadable!] (restricted)
  4. Bar-Ilan, Avner & Blinder, Alan S, 1992. "Consumer Durables: Evidence on the Optimality of Usually Doing Nothing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(2), pages 258-72, May. [Downloadable!] (restricted)
  5. Ye, Meng-Hua, 1990. "Optimal replacement policy with stochastic maintenance and operation costs," European Journal of Operational Research, Elsevier, vol. 44(1), pages 84-94, January. [Downloadable!] (restricted)
  6. Mauer, David C. & Ott, Steven H., 1995. "Investment under Uncertainty: The Case of Replacement Investment Decisions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(04), pages 581-605, December. [Downloadable!]
  7. Gilbert, Carol C. S., 1992. "A duration model of automobile ownership," Transportation Research Part B: Methodological, Elsevier, vol. 26(2), pages 97-114, April. [Downloadable!] (restricted)
  8. Raymond, Jennie E & Beard, T Randolph & Gropper, Daniel M, 1993. "Modelling the Consumer's Decision to Replace Durable Goods: A Hazard Function Approach," Applied Economics, Taylor and Francis Journals, vol. 25(10), pages 1287-92, October.
  9. Gourieroux, Christian & Monfort, Alain & Renault, Eric & Trognon, Alain, 1987. "Generalised residuals," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 5-32. [Downloadable!] (restricted)
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  1. A. Prinzie & D. Van Den Poel, 2007. "Predicting home-appliance acquisition sequences: Markov/Markov for Discrimination and survival analysis for modeling sequential information in NPTB models," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/442, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  2. Viviana Fernández, 2002. "What Drives Replacement of Durable Goods at the Micro Level?," Documentos de Trabajo 122, Centro de Economía Aplicada, Universidad de Chile. [Downloadable!]
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