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A theory of economic obsolescence

A theory of economic obsolescence
A theory of economic obsolescence
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 to implement price discrimination in two dimensions, both between consumers with different valuations and between consumers with different purchase histories. Equilibrium in the game between the durable goods monopolist and consumers depends on the extent of economic obsolescence and the relative sizes of the consumer groups. Underinvestment in innovation may take place. This contrasts with the standard literature on planned obsolescence where the durable goods monopolist overinvests in durability reducing technology.
0022-1821
383-401
Lee, I.H.
dc1302c9-2a3e-4639-a587-c8d8ffbca42e
Lee, J.
4b45ec6a-e52e-415c-acb7-7cb17ed57cbe
Lee, I.H.
dc1302c9-2a3e-4639-a587-c8d8ffbca42e
Lee, J.
4b45ec6a-e52e-415c-acb7-7cb17ed57cbe

Lee, I.H. and Lee, J. (1998) A theory of economic obsolescence. Journal of Industrial Economics, 46 (3), 383-401. (doi:10.1111/1467-6451.00077).

Record type: Article

Abstract

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 to implement price discrimination in two dimensions, both between consumers with different valuations and between consumers with different purchase histories. Equilibrium in the game between the durable goods monopolist and consumers depends on the extent of economic obsolescence and the relative sizes of the consumer groups. Underinvestment in innovation may take place. This contrasts with the standard literature on planned obsolescence where the durable goods monopolist overinvests in durability reducing technology.

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Published date: 1998

Identifiers

Local EPrints ID: 32986
URI: http://eprints.soton.ac.uk/id/eprint/32986
ISSN: 0022-1821
PURE UUID: ab33535a-be2d-4977-93de-2747e5e3ea7a

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Date deposited: 21 Jun 2007
Last modified: 15 Mar 2024 07:40

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Author: I.H. Lee
Author: J. Lee

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