What Drives Replacement of Durable Goods at the Micro Level?
Technological innovations have contributed over the years to an increasing stock of durable goods - those products that are not immediately consumed but provide a stream of services over a long period of time. Indeed, virtually every household in a modern economy owns a refrigerator, a personal computer and an automobile. Given the inter-temporal nature of replacement decisions, the existing literature has resorted to the technique of dynamic programming, and most recently to the theory of stochastic processes. This article focuses on micro replacement decisions. We survey some representative models of the recent literature, and discuss their empirical testability. In addition, we study replacement of home appliances in the United States, and construct a test statistic that leads to conclude that replacement decisions might be correlated across appliances. Finally, we enrich our analysis by developing a theoretical model in which replacement decisions are interdependent.
References listed on IDEAS
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.:
- Mauer, David C. & Ott, Steven H., 1995. "Investment under Uncertainty: The Case of Replacement Investment Decisions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(04), pages 581-605, December.
- Yeh, Ruey Huei, 1997. "Optimal inspection and replacement policies for multi-state deteriorating systems," European Journal of Operational Research, Elsevier, vol. 96(2), pages 248-259, January.
- Sanford J. Grossman & Guy Laroque, 1987.
"Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods,"
NBER Working Papers
2369, National Bureau of Economic Research, Inc.
- Grossman, Sanford J & Laroque, Guy, 1990. "Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods," Econometrica, Econometric Society, vol. 58(1), pages 25-51, January.
- Sanford J Grossman & Guy Laroque, 2003. "Asset Pricing and Optimal Portfolio Choice in the Presence of Illiquid Durable Consumption Goods," Levine's Working Paper Archive 618897000000000803, David K. Levine.
- Viviana Fernandez, 2000.
"Decisions to Replace Consumer Durables Goods: An Econometric Application of Wiener and Renewal Processes,"
Documentos de Trabajo
87, Centro de Economía Aplicada, Universidad de Chile.
- Viviana P. Fernandez, 2000. "Decisions To Replace Consumer Durables Goods: An Econometric Application Of Wiener And Renewal Processes," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 452-461, August.
- Cripps, John D & Meyer, Robert J, 1994. " Heuristics and Biases in Timing the Replacement of Durable Products," Journal of Consumer Research, University of Chicago Press, vol. 21(2), pages 304-18, September.
- Dubin, Jeffrey A & McFadden, Daniel L, 1984. "An Econometric Analysis of Residential Electric Appliance Holdings and Consumption," Econometrica, Econometric Society, vol. 52(2), pages 345-62, March.
- Malcomson, James M., 1975. "Replacement and the rental value of capital equipment subject to obsolescence," Journal of Economic Theory, Elsevier, vol. 10(1), pages 24-41, February.
- Bar-Ilan, Avner & Blinder, Alan S, 1992. "Consumer Durables: Evidence on the Optimality of Usually Doing Nothing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(2), pages 258-72, May.
- John Haltiwanger & Russell Cooper & Laura Power, 1999.
"Machine Replacement and the Business Cycle: Lumps and Bumps,"
American Economic Review,
American Economic Association, vol. 89(4), pages 921-946, September.
- Russell Cooper & John Haltiwanger & Laura Power, 1995. "Machine Replacement and the Business Cycle: Lumps and Bumps," Papers 0062, Boston University - Industry Studies Programme.
- Russell Cooper & John Haltiwanger & Laura Power, 1995. "Machine Replacement and the Business Cycle: Lumps and Bumps," NBER Working Papers 5260, National Bureau of Economic Research, Inc.
- Rust, John, 1985. "Stationary Equilibrium in a Market for Durable Assets," Econometrica, Econometric Society, vol. 53(4), pages 783-805, July.
- Gourieroux, Christian & Monfort, Alain & Renault, Eric & Trognon, Alain, 1987. "Generalised residuals," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 5-32.
- Parks, Richard W, 1974. "The Demand and Supply of Durable Goods and Durability," American Economic Review, American Economic Association, vol. 64(1), pages 37-55, March.
- Lai, K. K. & Leung, Francis K. N. & Tao, B. & Wang, S. Y., 2000. "Practices of preventive maintenance and replacement for engines: A case study," European Journal of Operational Research, Elsevier, vol. 124(2), pages 294-306, July.
- Caballero, Ricardo J, 1994. "Notes on the Theory and Evidence on Aggregate Purchases of Durable Goods," Oxford Review of Economic Policy, Oxford University Press, vol. 10(2), pages 107-17, Summer.
- Marell, Agneta & Davidsson, Per & Garling, Tommy, 1995. "Environmentally friendly replacement of automobiles," Journal of Economic Psychology, Elsevier, vol. 16(3), pages 513-529, September.
- Ye, Meng-Hua, 1990. "Optimal replacement policy with stochastic maintenance and operation costs," European Journal of Operational Research, Elsevier, vol. 44(1), pages 84-94, January.
- Robert F. Martin, 2003. "Consumption, durable goods, and transaction costs," International Finance Discussion Papers 756, Board of Governors of the Federal Reserve System (U.S.).
- Kristensen, Anders Ringgaard, 1994. "A Survey of Markov Decision Programming Techniques Applied to the Animal Replacement Problem," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 21(1), pages 73-93.
- Morton I. Kamien & Nancy L. Schwartz, 1971. "Optimal Maintenance and Sale Age for a Machine Subject to Failure," Management Science, INFORMS, vol. 17(8), pages B495-B504, April.
When requesting a correction, please mention this item's handle: RePEc:edj:ceauch:122. 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: ()
If references are entirely missing, you can add them using this form.