Planned Obsolescence and the Provision of Unobservable Quality
This paper develops the idea that obsolescence acts as an incentive device to provide quality for experience goods. The argument is that obsolescence affects the frequency at which consumers repurchase products and may punish producers for a lack of quality. A higher rate of obsolescence enables a firm to convince its consumers that it provides high quality. We identify a trade--off between quality and durability, implying that the two are substitutes. This leads to excessive obsolescence. The inefficiency is due to unobservability and not monopolistic distortions. The theory follows naturally from the theory of repeated games.
|Date of creation:|
|Date of revision:|
|Contact details of provider:|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Choi Jay Pil, 2001. "Planned Obsolescence As A Signal of Quality," International Economic Journal, Taylor & Francis Journals, vol. 15(4), pages 59-79.
- Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, vol. 98(4), pages 659-79, November.
- Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
- Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
- Swan, Peter L, 1970. "Market Structure and Technological Progress: The Influence of Monopoly on Product Innovation," The Quarterly Journal of Economics, MIT Press, vol. 84(4), pages 627-38, November.
- Waldman, Michael, 1993. "A New Perspective on Planned Obsolescence," The Quarterly Journal of Economics, MIT Press, vol. 108(1), pages 273-83, February.
- Schmalensee, Richard, 1979. "Market Structure, Durability, and Quality: A Selective Survey," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 177-96, April.
- Jae Nahm, 2004. "Durable-Goods Monopoly with Endogenous Innovation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(2), pages 303-319, 06.
- Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-29, March-Apr.
- Choi, Jay Pil, 1994. "Network Externality, Compatibility Choice, and Planned Obsolescence," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 167-82, June.
- Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April.
- Bulow, Jeremy, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 729-49, November.
When requesting a correction, please mention this item's handle: RePEc:bef:lsbest:028. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (XXX)
If references are entirely missing, you can add them using this form.