Consumer Discount Rates and the Decision to Repair or Replace a Durable Product: A Sustainable Consumption Issue
America has often been labeled a "throw-away" society due to the large amount of products that could have been reused but are discarded from a typical household on a daily basis. This paper attempts to answer the question of why, when given two consumers with the same income level and socio-economic background, does one consumer choose to replace an older, malfunctioning household product while the other chooses to have the product repaired for further reuse. To help address this question an enhanced replacement model is presented and empirically tested. The replacement model has been around for some time, helping consumers and firms make capital budgeting decisions. This analysis can be extrapolated to the macro level where one economy with a higher societal discount rate might be more strongly characterized as a "throw-away society" than a similar economy with lower societal consumption discount rates.
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