An Economic Theory of Planned Obsolescence
@article{Bulow1985AnET, title={An Economic Theory of Planned Obsolescence}, author={Jeremy I. Bulow}, journal={Quarterly Journal of Economics}, year={1985}, volume={101}, pages={729-749} }
"Planned Obsolescence" is the production of goods with uneconomically short useful lives so that customers will have to make repeat purchases. However, rational customers will pay for only the present value of the future services of a product. Therefore, profit maximization seemingly implies producing any given flow of services as cheaply as possible, with production involving efficient useful lives. This paper shows why this analysis is incomplete and therefore incorrect. Monopolists are shown…
Tables from this paper
487 Citations
Planned Obsolescence As A Signal of Quality
- Economics
- 2001
This paper provides a new rationale for planned obsolescence based on imperfect information about the quality of durable goods. The source of the inefficient choice of durability lies in the fact…
Planned Obsolescence As A Signal of Quality
- Economics
- 2001
This paper provides a new rationale for planned obsolescence based on imperfect information about the quality of durable goods. The source of the inefficient choice of durability lies in the fact…
Planned obsolescence
- Economics, Business
- 1994
This paper shows that large companies in competitive markets have a strong incentive to apply the strategy of planned obsolescence to boost profits. Planned obsolescence means reducing the expected…
A Theory of Economic Obsolescence
- Economics
- 2003
A new generation of durable goods makes an old generation economically, even if not physically, obsolete. Economic obsolescence due to technological innovation requires the durable goods monopolist…
Planned Obsolescence and Social Welfare
- Economics
- 2006
Durable-goods marketing has an obsolescence effect on older models. I consider two cases: commitment (where the decision on how much to invest in marketing is made in the first period) and…
Another Perspective on Planned obsolescence: is there really too much Innovation?
- Economics
- 2003
Models of durable goods with network externalities that set instantaneously have emphasized that a monopolist selling those goods has too high an incentive to introduce new vintages of the durable…
Planned obsolescence and marketing strategy
- Business, Economics
- 2000
By using a two-period model of a durable goods monopolist, we investigate marketing activities that have an obsolescence effect on products already sold in the past period. We assume that the…
The Limits of Planned Obsolescence for Conspicuous Durable Goods
- BusinessManuf. Serv. Oper. Manag.
- 2016
It is shown that firms’ durability choice may explain the joint increase in price and demand for conspicuous goods, and that offering higher durability and charging a higher price are complementary levers to respond to consumers who value exclusivity.
Durable Goods Monopoly and Forward Markets
- Economics
- 2002
The existence of forward markets has long been explained by risk hedging behaviour. More recently, attention has focused on the Cournot competition rationale for the emergence of forward markets…
Dynamic consistency and monopoly
- Economics, Business
- 2003
A wide variety of papers study the time consistency issues and commitment problems associated with imperfectly competitive durable goods manufacturers who sell their output. Using a simple two-period…
References
SHOWING 1-10 OF 18 REFERENCES
Optimum Durability, Second-Hand Markets, and Planned Obsolescence
- EconomicsJournal of Political Economy
- 1972
Some casual evidence suggests and popular imagination maintains that planned obsolescence is an increasingly important feature of durable goods production in modern capitalist economies (for example,…
Rational Expectations and Durable Goods Pricing
- Economics
- 1981
The market for a durable good sold by a monopolist is examined by using both continuous-time and discrete-time versions of the same model. The requirement that buyers' expectations must be fulfilled…
Regulation and the durability of goods
- Economics
- 1970
This paper considers the production of durable goods that deteriorate at a constant percentage rate under conditions of competitive and monopoly equilibrium. A perfect market in used units of the…
Monopoly and Competition in the Market for Durable Goods
- Economics
- 1973
While economic theory has concentrated considerable attention on the firm as a user and accumulator of capital, analysis of its role as a producer of durable capital goods appears to have suffered…
Durability and Monopoly
- Economics, HistoryThe Journal of Law and Economics
- 1972
ASSUME that a supplier owns the total stock of a completely durable good. At what price will he sell it? To take a concrete example, assume that one person owns all the land in the United States and,…
LEASING, BUYING, AND THE COST OF CAPITAL SERVICES
- Economics, Business
- 1976
Publisher Summary This chapter discusses the concept of leasing, buying, and the cost of capital services. The contrast between the economist's and the accountant's approach to the problems of…
The Timing of Sales
- Economics
- 1984
This paper presents a model of intertemporal price discrimination. A fixed number of sellers produce a homogeneous good. Consumers with different preferences enter the market in each period and leave…
Tobin's q, Unionization, and the Concentration-Profits Relationship
- Economics
- 1984
This article uses Tobin's q, the ratio of the market value of a firm to the replacement value of its physical assets, to measure monopoly power and to examine the relationship between market…