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Asset and Commodity Prices with Multiattribute Durable Goods

  • Jérôme B. Detemple
  • Christos I. Giannikos

We consider a pure exchange representative agent economy with perishable and durable commodities in which the durable good provides status as well as services. We examine the effects of the durable's attributes on demands and equilibrium prices. When the attributes are perfect substitutes irreversibility of the durable's purchases may cause temporary excesses of actual services over their desired level. Stickiness in adjustment is asymmetric since increases in desired status level are met by immediate purchases. We show that the equilibrium interest rate depends, in particular, on the growth rates of the durable's attributes and that asset risk premia satisfy a two-beta consumption CAPM. Conditions under which durability increases asset risk premia are provided. Nous considérons une économie de pur échange à agent représentatif avec biens périssables et durables dans laquelle le bien durable procure du statut ainsi que des services. Nous examinons les effets de ces deux attributs du bien durable sur les demandes et les prix d'équilibre. Lorsque les attributs sont des substituts parfaits l'irréversibilité des achats du durable peut créer des excès temporaires de services courants par rapport à leur niveau désiré. L'inflexibilité de l'ajustement est asymmétrique puisqu'une augmentation du niveau de statut désiré est réalisée par des achats immédiats. Nous démontrons que le taux d'intérêt d'équilibre dépend, en particulier, des taux de croissance des attributs du bien durable et que les primes de risque vérifient un MÉDAF de consommation à deux bétas. Nous examinons les conditions sous lesquelles la durabilité augmente les primes de risque des actifs financiers.

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Paper provided by CIRANO in its series CIRANO Working Papers with number 95s-47.

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Length: 64 pages
Date of creation: 01 Nov 1995
Date of revision:
Handle: RePEc:cir:cirwor:95s-47
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