IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-03124839.html
   My bibliography  Save this paper

Live fast, die young? Investigating product life spans and obsolescence in an agent-based model

Author

Listed:
  • Eric Brouillat

    (GREThA - Groupe de Recherche en Economie Théorique et Appliquée - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique)

Abstract

his article presents an agent-based simulation model that explores the dynamics of product life spans. The objective of this modeling exercise is to investigate the interplay between technological change and product life span in extended industrial dynamics. Change in product characteristics is driven by an endogenous stochastic process relying on the interplays between heterogeneous consumers and firms. Special attention is paid to demand-side modeling, which allows analyzing more thoroughly how decisions of bounded rational consumers affect the dynamics of the system. Although most existing models on product life span investigate durable goods monopolists, our study highlights the notion that diversity matters. Diversity of supply and demand in a bounded rationality context can push firms to market products with longer life spans, but their diffusion is restrained by the sensitivity of consumers to product obsolescence and their willingness to pay for longer-lasting products. The dynamics of consumer preferences influenced by firm marketing activities tend to maintain this situation which contributes to locking the market into short product-life trends. Unlocking the system requires changes in consumer behavior and better information about product life span and cost per use for consumers.

Suggested Citation

  • Eric Brouillat, 2014. "Live fast, die young? Investigating product life spans and obsolescence in an agent-based model," Post-Print hal-03124839, HAL.
    • Handle: RePEc:hal:journl:hal-03124839
    DOI: 10.1007/s00191-014-0385-1
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Barry L. Bayus, 1998. "An Analysis of Product Lifetimes in a Technologically Dynamic Industry," Management Science, INFORMS, vol. 44(6), pages 763-775, June.
    2. Daniel A. Levinthal & Devavrat Purohit, 1989. "Durable Goods and Product Obsolescence," Marketing Science, INFORMS, vol. 8(1), pages 35-56.
    3. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2003. "Product Choice and Product Switching," Yale School of Management Working Papers ysm381, Yale School of Management.
    4. 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.
    5. Paul A. Grout & In-Uck Park, 2005. "Competitive Planned Obsolescence," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 596-612, Autumn.
    6. Choi, Jay Pil, 1994. "Network Externality, Compatibility Choice, and Planned Obsolescence," Journal of Industrial Economics, Wiley Blackwell, vol. 42(2), pages 167-182, June.
    7. Swan, Peter L, 1970. "Durability of Consumption Goods," American Economic Review, American Economic Association, vol. 60(5), pages 884-894, December.
    8. Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
    9. Eric Brouillat, 2009. "Recycling and extending product-life: an evolutionary modelling," Journal of Evolutionary Economics, Springer, vol. 19(3), pages 437-461, June.
    10. Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
    11. Anderson, Simon P. & Ginsburgh, Victor A., 1994. "Price discrimination via second-hand markets," European Economic Review, Elsevier, vol. 38(1), pages 23-44, January.
    12. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132-132.
    13. E. Sieper & P. L. Swan, 1973. "Monopoly and Competition in the Market for Durable Goods," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 40(3), pages 333-351.
    14. Marco Valente, 2012. "Evolutionary demand: a model for boundedly rational consumers," Journal of Evolutionary Economics, Springer, vol. 22(5), pages 1029-1080, November.
    15. 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.
    16. Paul M. Weaver, 2008. "Incentives and frameworks for increasing the capital value, service value and use rates of durable goods," International Journal of Product Development, Inderscience Enterprises Ltd, vol. 6(3/4), pages 310-333.
    17. George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(3), pages 488-500.
    18. Waldman, Michael, 1996. "Durable Goods Pricing When Quality Matters," The Journal of Business, University of Chicago Press, vol. 69(4), pages 489-510, October.
    19. Michael Waldman, 1993. "A New Perspective on Planned Obsolescence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(1), pages 273-283.
    20. Drew Fudenberg & Jean Tirole, 1998. "Upgrades, Tradeins, and Buybacks," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 235-258, Summer.
    21. Fernandez, Viviana P., 2001. "Observable and unobservable determinants of replacement of home appliances," Energy Economics, Elsevier, vol. 23(3), pages 305-323, May.
    22. 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.
    23. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-332, April.
    24. 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.
    25. Jeremy Bulow, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(4), pages 729-749.
    26. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-149, April.
    27. In Ho Lee & Jonghwa Lee, 1998. "A Theory of Economic Obsolescence," Journal of Industrial Economics, Wiley Blackwell, vol. 46(3), pages 383-401, September.
    28. G. Silverberg & B. Verspagen, 1995. "Evolutionary Theorizing on Economic Growth," Working Papers wp95078, International Institute for Applied Systems Analysis.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bölen, Mehmet Cem, 2020. "From traditional wristwatch to smartwatch: Understanding the relationship between innovation attributes, switching costs and consumers' switching intention," Technology in Society, Elsevier, vol. 63(C).
    2. Braganza, Oliver, 2022. "Market paternalism: Do people really want to be nudged towards consumption?," ifso working paper series 23, University of Duisburg-Essen, Institute for Socioeconomics (ifso).
    3. Florian Chávez-Juárez, 2017. "On the Role of Agent-based Modeling in the Theory of Development Economics," Review of Development Economics, Wiley Blackwell, vol. 21(3), pages 713-730, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eric Brouillat, 2011. "Durability of consumption goods and market competition: an agent-based modelling," Post-Print hal-00780254, HAL.
    2. Michael Waldman, 2004. "Antitrust Perspectives for Durable-Goods Markets," CESifo Working Paper Series 1306, CESifo.
    3. Michael Waldman, 2003. "Durable Goods Theory for Real World Markets," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 131-154, Winter.
    4. Judith Chevalier & Austan Goolsbee, 2009. "Are Durable Goods Consumers Forward-Looking? Evidence from College Textbooks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1853-1884.
    5. Gerstle, Ari D. & Waldman, Michael, 2016. "Mergers in durable-goods industries: A re-examination of market power and welfare effects," Research in Economics, Elsevier, vol. 70(4), pages 677-692.
    6. Galiani, Sebastian & Jaitman, Laura & Weinschelbaum, Federico, 2020. "Crime and durable goods," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 146-163.
    7. Adriano A. Rampini, 2019. "Financing Durable Assets," American Economic Review, American Economic Association, vol. 109(2), pages 664-701, February.
    8. Utaka, Atsuo, 2008. "Pricing strategy, quality signaling, and entry deterrence," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 878-888, July.
    9. Baojun Jiang & Lin Tian, 2018. "Collaborative Consumption: Strategic and Economic Implications of Product Sharing," Management Science, INFORMS, vol. 64(3), pages 1171-1188, March.
    10. Francesco Nava & Pasquale Schiraldi, 2019. "Differentiated Durable Goods Monopoly: A Robust Coase Conjecture," American Economic Review, American Economic Association, vol. 109(5), pages 1930-1968, May.
    11. Qiu_Hong Wang & Kai-Lung Hui, 2005. "Technology Timing and Pricing In the Presence of an Installed Base," Industrial Organization 0512013, University Library of Munich, Germany.
    12. Roland Strausz, 2009. "Planned Obsolescence as an Incentive Device for Unobservable Quality," Economic Journal, Royal Economic Society, vol. 119(540), pages 1405-1421, October.
    13. Qiu-Hong Wang & Kai-Lung Hui, 2017. "Technology Mergers and Acquisitions in the Presence of an Installed Base: A Strategic Analysis," Information Systems Research, INFORMS, vol. 28(1), pages 46-63, March.
    14. Kutsoati, Edward & Zabojnik, Jan, 2005. "The effects of learning-by-doing on product innovation by a durable good monopolist," International Journal of Industrial Organization, Elsevier, vol. 23(1-2), pages 83-108, February.
    15. Cerquera Dussán, Daniel, 2007. "Durable Goods, Innovation and Network Externalities," ZEW Discussion Papers 07-086, ZEW - Leibniz Centre for European Economic Research.
    16. Hoppe, Heidrun C. & Lee, In Ho, 2003. "Entry deterrence and innovation in durable-goods monopoly," European Economic Review, Elsevier, vol. 47(6), pages 1011-1036, December.
    17. Edward Kutsoati & Jan Zabojnik, 2001. "Durable Goods Monopoly, Learning-by-doing and "Sleeping Patents"," Discussion Papers Series, Department of Economics, Tufts University 0105, Department of Economics, Tufts University.
    18. Pasquale Schiraldi, 2006. "Second-Hand Markets and Collusion by Manufacturers of Semidurable Goods," Boston University - Department of Economics - Working Papers Series WP2006-028, Boston University - Department of Economics.
    19. Evrim Dener, 2011. "Quality uncertainty and time inconsistency in a durable good market," Journal of Economics, Springer, vol. 104(1), pages 1-24, September.
    20. Kumar, Praveen, 2002. "Price and quality discrimination in durable goods monopoly with resale trading," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1313-1339, November.

    More about this item

    Keywords

    Industrial dynamics; Agent-based modeling; Obsolescence; Product durability; Product life spans; Sustainable consumption;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-03124839. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.