An Economic Theory of Planned Obsolescence

  title={An Economic Theory of Planned Obsolescence},
  author={Jeremy I. Bulow},
  journal={Quarterly Journal of Economics},
  • Jeremy I. Bulow
  • Published 1 November 1986
  • Economics
  • Quarterly Journal of Economics
"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… 

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