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A Simple Durable Goods Model

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  • David Levine

Abstract

The durability of a good has two implications. First, it can be stored in inventories by producers. Second, if it provides a stream of services to consumers, consumers may wish to defer purchases to take advantage of price fluctuations. The most significant conclusion is that the stockpiling of demand that results when consumers defer purchases explains why the variance of output exceeds the variance of sales even if demand shocks are serially independent.

Suggested Citation

  • David Levine, 1985. "A Simple Durable Goods Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(3), pages 775-788.
    • Handle: RePEc:oup:qjecon:v:100:y:1985:i:3:p:775-788.
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    File URL: http://hdl.handle.net/10.2307/1884378
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    Cited by:

    1. K Kogan & U Spiegel, 2006. "Dynamic zigzag pricing of resalable goods with no depreciation and intergroup externalities," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(11), pages 1353-1365, November.
    2. Rajeev K. Goel & Edward W. T. Hsieh, 2004. "Durable Emissions and Optimal Pigouvian Taxes," Public Finance Review, , vol. 32(4), pages 441-449, July.
    3. David Levine, 1985. "A Simple Durable Goods Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(3), pages 775-788.
    4. Rajeev Goel, 2007. "On advertising durability and product durability," Applied Economics Letters, Taylor & Francis Journals, vol. 14(1), pages 21-25.
    5. Rajeev Goel, 2006. "Uncertain innovation with uncertain product durability," Applied Economics Letters, Taylor & Francis Journals, vol. 13(13), pages 829-834.

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