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Planned Obsolescence as an Incentive Device for Unobservable Quality

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  • Roland Strausz

Abstract

Stressing the multi-dimensional character of quality, I propose a new theory of planned obsolescence as an incentive device that benefits consumers. I argue that planned obsolescence increases the frequency of repurchases and, therefore, enables consumers to punish producers faster for a lack of overall quality. This strengthens the producers' incentives to provide adequate levels of quality. The theory implies a trade-off between a good's durability and its other unobservable quality attributes. This leads to an artificially high degree of obsolescence as compared to the first best where quality is observable. Copyright © The Author(s). Journal compilation © Royal Economic Society 2009.

Suggested Citation

  • Roland Strausz, 2009. "Planned Obsolescence as an Incentive Device for Unobservable Quality," Economic Journal, Royal Economic Society, vol. 119(540), pages 1405-1421, October.
  • Handle: RePEc:ecj:econjl:v:119:y:2009:i:540:p:1405-1421
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    Cited by:

    1. Jong-Hee Hahn & Jin-Hyuk Kim, 2012. "Monopoly R&D and Compatibility Decisions in Network Industries," Working papers 2012rwp-43, Yonsei University, Yonsei Economics Research Institute.
    2. ISHIKAWA Jota & MORITA Hodaka & MUKUNOKI Hiroshi, 2015. "Parallel Imports and Repair Services," Discussion papers 15060, Research Institute of Economy, Trade and Industry (RIETI).
    3. Strausz, Roland, 2009. "Monopoly distortions in durability and multi-dimensional quality," Economics Letters, Elsevier, vol. 105(3), pages 333-335, December.
    4. repec:eee:eecrev:v:98:y:2017:i:c:p:424-441 is not listed on IDEAS
    5. Martin Paredes, 2015. "Brand Loyalty, Volume of Trade and Leapfrogging: Consumer Behavior in Markets of Durable Experience Goods," Working Papers 2015-31, Peruvian Economic Association.
    6. Abraham L. Wickelgren, 2016. "An Economic Analysis of Arbitration versus Litigation for Contractual Disputes," Journal of Law and Economics, University of Chicago Press, vol. 59(2), pages 393-410.
    7. Massimiliano Borrello & Francesco Caracciolo & Alessia Lombardi & Stefano Pascucci & Luigi Cembalo, 2017. "Consumers’ Perspective on Circular Economy Strategy for Reducing Food Waste," Sustainability, MDPI, Open Access Journal, vol. 9(1), pages 1-18, January.

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