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Secondhand market and the lifetime of durable goods

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  • Antonio R. Sampayo
  • Luis A. Puch
  • Omar Licandro

Abstract

This paper examines how a scrappage subsidy affects the lifetime of durable goods when secondhand markets are present. To this end, we propose a vintage model to analyze the replacement decision in an economy in which high and low income agents trade on a durable good. Thus, the existence of a secondhand market for this durable good has influence both on the price of used durables as well as on durables replacement. The value of the durable is decreasing with age so it is the price in the secondary market. We also discuss the implications of this model specification for the effects of second hand markets on the average age of the stock of durable goods.

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File URL: http://documentos.fedea.net/pubs/dt/2006/dt-2006-10.pdf
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Bibliographic Info

Paper provided by FEDEA in its series Working Papers with number 2006-10.

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Date of creation: Jun 2006
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Handle: RePEc:fda:fdaddt:2006-10

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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.
  2. Malcomson, James M., 1975. "Replacement and the rental value of capital equipment subject to obsolescence," Journal of Economic Theory, Elsevier, vol. 10(1), pages 24-41, February.
  3. Austan Goolsbee, 1998. "The Business Cycle, Financial Performance, and the Retirement of Capital Goods," NBER Working Papers 6392, National Bureau of Economic Research, Inc.
  4. Jerome Adda & Russell Cooper, 1997. "Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies," Papers 0076, Boston University - Industry Studies Programme.
  5. Raouf Boucekkine & David de la Croix & Omar Licandro, 2006. "Vintage Capital," Economics Working Papers ECO2006/8, European University Institute.
  6. Robert H. Porter & Peter Sattler, 1999. "Patterns of Trade in the Market for Used Durables: Theory and Evidence," NBER Working Papers 7149, National Bureau of Economic Research, Inc.
  7. Boucekkine, Raouf & Germain, Marc & Licandro, Omar & Magnus, Alphonse, 2001. "Numerical solution by iterative methods of a class of vintage capital models," Journal of Economic Dynamics and Control, Elsevier, vol. 25(5), pages 655-669, May.
  8. Boucekkine, Raouf & Germain, Marc & Licandro, Omar, 1997. "Replacement Echoes in the Vintage Capital Growth Model," Journal of Economic Theory, Elsevier, vol. 74(2), pages 333-348, June.
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Cited by:
  1. Boyan Jovanovic, 2009. "When should firms invest in old capital?," International Journal of Economic Theory, The International Society for Economic Theory, vol. 5(1), pages 107-123.
  2. Yurko, Anna, 2008. "From Consumer Incomes to Car Ages: How the Distribution of Income Affects the Distribution of Vehicle Vintages," MPRA Paper 8849, University Library of Munich, Germany, revised Apr 2008.

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