Durability of consumption goods and market competition: an agent-based modelling
This paper presents an agent-based simulation model that explores the dynamics of product lifetimes on a competitive market. The main objective of this modelling exercise is to investigate the conditions under which product-life extension strategies can be effective. In this model, change in products’ characteristics is driven by an endogenous stochastic process relying on the interplays between heterogeneous consumers and firms. The main contribution of the paper is to present a detailed modeling of demand which enables to analyze more thoroughly how decisions of bounded rational consumers impact on the dynamics of the system and, more particularly, how purchase process shapes market selection and strategies of firms. While most existing literature on product lifetime investigates durable goods monopolists, our study highlights that competition and diversity matter. The coexistence of competing products with different lifetimes can encourage firms to market long lifetime products. Our results also stress the critical role played in market dynamics by the processes driving purchase decision. The purchasing behavior of consumers in itself will greatly guide firms’ strategies and in fine shape market structure.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: Avenue Léon Duguit, 33608 Pessac Cedex|
Phone: +33 (0)184.108.40.206.75
Fax: +33 (0)220.127.116.11.47
Web page: http://gretha.u-bordeaux4.fr/
More information through EDIRC
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.:
- Simon P. Anderson & Victor Ginsburgh, 1994.
"Price discrimination via second-hand markets,"
ULB Institutional Repository
2013/1719, ULB -- Universite Libre de Bruxelles.
- Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
- Swan, Peter L, 1970. "Durability of Consumption Goods," American Economic Review, American Economic Association, vol. 60(5), pages 884-94, December.
- Van Raaij, W. Fred & Gianotten, Henk J., 1990. "Consumer confidence, expenditure, saving, and credit," Journal of Economic Psychology, Elsevier, vol. 11(2), pages 269-290, June.
- Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132.
- Waldman, Michael, 1996. "Durable Goods Pricing When Quality Matters," The Journal of Business, University of Chicago Press, vol. 69(4), pages 489-510, October.
- Michael Waldman, 1993. "A New Perspective on Planned Obsolescence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 273-283.
- Daniel A. Levinthal & Devavrat Purohit, 1989. "Durable Goods and Product Obsolescence," Marketing Science, INFORMS, vol. 8(1), pages 35-56.
- Eric Brouillat, 2009.
"Recycling and extending product-life: an evolutionary modelling,"
Journal of Evolutionary Economics,
Springer, vol. 19(3), pages 437-461, June.
- Eric Brouillat, 2008. "Recycling and extending product-life: an evolutionary modelling," Post-Print hal-00255002, HAL.
- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
- Lee, In Ho & Lee, Jonghwa, 1998. "A Theory of Economic Obsolescence," Journal of Industrial Economics, Wiley Blackwell, vol. 46(3), pages 383-401, September.
- Peter L. Swan, 1971. "The Durability of Goods and Regulation of Monopoly," Bell Journal of Economics, The RAND Corporation, vol. 2(1), pages 347-357, Spring.
- Igal Hendel & Alessandro Lizzeri, 1997.
"Adverse Selection in Durable Goods Markets,"
NBER Working Papers
6194, National Bureau of Economic Research, Inc.
- Paul A. Grout & In-Uck Park, 2005. "Competitive Planned Obsolescence," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 596-612, Autumn.
- Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April.
- Jeremy Bulow, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 729-749.
- Saviotti, P. P. & Metcalfe, J. S., 1984. "A theoretical approach to the construction of technological output indicators," Research Policy, Elsevier, vol. 13(3), pages 141-151, June.
- G. Silverberg & B. Verspagen, 1995. "Evolutionary Theorizing on Economic Growth," Working Papers wp95078, International Institute for Applied Systems Analysis.
- Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
- Barry L. Bayus, 1998. "An Analysis of Product Lifetimes in a Technologically Dynamic Industry," Management Science, INFORMS, vol. 44(6), pages 763-775, June.
- Eric Brouillat, 2009. "An evolutionary model of recycling and product lifetime extension," Post-Print hal-00285438, HAL.
- Fernandez, Viviana P., 2001. "Observable and unobservable determinants of replacement of home appliances," Energy Economics, Elsevier, vol. 23(3), pages 305-323, May.
- Michael Waldman, 1996. "Planned Obsolescence and the R&D Decision," RAND Journal of Economics, The RAND Corporation, vol. 27(3), pages 583-595, Autumn.
- Marell, Agneta & Davidsson, Per & Garling, Tommy, 1995. "Environmentally friendly replacement of automobiles," Journal of Economic Psychology, Elsevier, vol. 16(3), pages 513-529, September.
- Arthur Fishman & Rafael Rob, 2000. "Product Innovation by a Durable-Good Monpoly," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 237-252, Summer.
- Igal Hendel & Alessandro Lizzeri, 1999. "Interfering with Secondary Markets," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 1-21, Spring.
- Marco Valente, 1998. "Laboratory for Simulation Development," DRUID Working Papers 98-5, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
- E. Sieper & P. L. Swan, 1973. "Monopoly and Competition in the Market for Durable Goods," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 333-351.
- Choi, Jay Pil, 1994. "Network Externality, Compatibility Choice, and Planned Obsolescence," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 167-82, June.
When requesting a correction, please mention this item's handle: RePEc:grt:wpegrt:2011-31. 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: (Emmanuel Petit)
If references are entirely missing, you can add them using this form.