IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Durable-Goods Oligopoly with Secondary Markets: Theory and an Empirical Application to the Automobile Market

Listed author(s):
  • Susanna Esteban
  • Matthew Shum

We examine the effects of durability on equilibrium producer behavior in the car market In this setting forward-looking producers take into account the effect that their current production decisions have on their current and future profits due to the existence of a secondary market First we construct a dynamic oligopoly model of a vertically-differentiated product market to understand the equilibrium production dynamics which arise from the durability of the goods and their active trade in secondary markets Second we use data from the automobile industry to estimate a tractable linear-quadratic version of this model One result suggests that durability may be a particularly desirable car feature for high-quality car producers since by overproducing today they can exploit durability and the existence of a secondary market to potentially reduce their lower-quality competitors' future production: planned obsolescence appears to be a more profitable strategy for lower-end than higher-end producers

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by The Johns Hopkins University,Department of Economics in its series Economics Working Paper Archive with number 454.

in new window

Date of creation: Aug 2001
Handle: RePEc:jhu:papers:454
Contact details of provider: Postal:
3400 North Charles Street Baltimore, MD 21218

Phone: 410-516-7601
Fax: 410-516-7600
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is featured on the following reading lists or Wikipedia pages:

  1. Studies on the automobile industry

When requesting a correction, please mention this item's handle: RePEc:jhu:papers:454. 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: (None)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.