What Are Durable Goods?

Durable goods refer to products that can be used repeatedly and have a longer life, such as televisions, refrigerators, stereos, and computers. Consumers make more prudent decisions when purchasing such goods. Enterprises producing this kind of goods must pay attention to technological innovation and improve product quality. At the same time, they must do a good job of after-sales service to meet the post-purchase needs of consumers. ^[1]

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Durable goods refer to products that can be used repeatedly and have a longer life, such as televisions, refrigerators, stereos, and computers. Consumers are more cautious when buying such goods. Enterprises producing this kind of goods must pay attention to technological innovation and improve product quality. At the same time, they must do a good job of after-sales service to meet the post-purchase needs of consumers. ^[1]

The degree of product durability is usually measured by its life span or expressed by quality, which is just as important as output and price in actual production.

The question of durability selection is a basic issue in the study of durable goods theory. Wicksell (1934) discusses "

(1) Pay attention to sales promotion and service;

(2) Pursue high

Research on durable goods goes back to

Time inconsistency

Coase (1972) proposed that since durable goods sold in the future will affect the future value of products sold now, monopolies cannot internalize this externality without the ability to make some kind of commitment. Under the premise that monopoly manufacturers of durable goods sell products indefinitely and cannot make promises for future output levels, Coase conjectures that if consumers have rational expectations, the monopoly price will quickly fall to the marginal cost level; Monopolists can avoid this problem by leasing.

According to Coase's conjecture, we know that for durable goods monopoly manufacturers, renting can not only avoid the problem of inconsistent time, but also obtain more profits than sales. This theory has also been widely put into practice. Commercial giants such as IBM and Xerox have used rental products as their main source of profit. However, as monopoly manufacturers can obtain monopoly profits from the rental of certain products, the government has restricted this and required only sales.

Second-hand market and adverse selection

After the new product is launched, consumers who prefer new styles and new features will buy new products and use the old ones

Durable goods

Products are sold to consumers who are only willing to offer low prices, thus forming a second-hand market. In some developed countries, the markets for used cars, used appliances, and old textbooks are very large and active. Monopoly manufacturers have no monopoly control over the second-hand market. They have cultivated a competitor for themselves. The price, durability and availability of second-hand products all affect the output and price of new products and the durability of new products by manufacturers. s Choice. The secondary market is a special and indispensable part of the durable goods market.

Lawrence realized this problem in 1969. He believes that automakers produce different products and introduce new models every year, mainly because the durable goods market is divided into new and old markets, and old and new products are not completely replaced. If there is no second-hand market, Monopoly manufacturers have no incentive to reduce product durability. So what is the impact of the existence of the secondary market on producers and the relationship between the old and new markets?

Benjamin and Kormendi (1974) first analyzed this. Miller (1974) argues that because monopolists cannot directly benefit from the sale of used goods, they will increase the price of new products in order to occupy the largest surplus. () hose, Telang, and Krishnan (2003) believe that the existence of the secondary market has two effects on producers. One is the "temporary price competition effect". This direct effect prompts manufacturers to reduce the price of new products to fight against competition in the secondary market. Second, the indirect "market expansion effect". After the price of new products is reduced, it can attract more consumers to buy and the profits of manufacturers increase. Therefore, the existence of the secondary market will cause the prices of new products to fall, which will harm the interests of producers.

Discussions in this regard are also intense in real life. In 2002, the New York Times wrote: Amazon sells used books hurting authors. And Amazon thinks their online used book market has actually stimulated new book sales. Whether it is right or wrong requires further research and proof of the theory.

Plan for obsolescence and new product launches

The concept of planned abandonment is closely related to the theories of durability selection, time inconsistency, and second-hand market, etc. It refers to the manufacturer's planned production of uneconomically short-lived products, which makes consumers have to repeat purchases. People in the early 1950s complained that the quality of cars, houses, and televisions was far worse than their parents' days. This shows that in the capitalist economy of the time

Durable Goods-Computer

The planned abandonment has become an increasingly important feature in the production of durable goods.

With the strengthening of the role of technological progress in production, planned abandonment has not only been achieved by reducing the durability, and the study of its theory is no longer limited to discussing the choice of durability. Wardman (1993) gave a new interpretation of the planned obsolescence, suggesting that the monopolist is to eliminate the old product by continuously introducing new products. The logical basis of this conclusion is time inconsistency. But unlike Brow (1986), Wardman believes that plan abandonment is a direct result of time inconsistency, not what Brow said is to abandon plan to avoid time inconsistency.

In fact, the planned obsolescence referred to by Wardman can basically be equated with the concept of new product launch. Especially in the current information society, technological innovations are emerging in an endless stream, and the rate of upgrading of computers, software, mobile phones and other products has accelerated dramatically. The manufacturer's plan to abandon seems to have more meaning, but it is similar to the textbook that releases a new version every few years. The speed of launch, compatibility of old and new versions, and how to price new and old users are basically the same.

Consumption theory

Although Miller applied the investment theory to the optimal distribution of consumer spending between durable and non-durable goods in 1961, and proposed the consumer's optimal replacement decision for durable goods. But for a long time, research on durable goods has focused on producer behavior and ignored

Durable goods

Consumers. In the mid-1970s, Schmalensee and R. Parks (1974) and Teddy Su (1975) introduced consumer behavior in the optimal durability decision. It is believed that although the durability is determined by the producer, the consumer can decide based on factors such as the speed of depreciation of the product and the cost of maintenance. Optimal replacement time. Of course, the existence of the secondary market is also a catalyst for this alternative. Because the replacement of new and old products makes the second-hand market and the new product market interact, consumers can adjust the amount of durable goods based on their income levels.

In the 1980s, the issue of consumption of durable goods became a new field of consumption theory research. Mankun discovered in 1982 that the random process of durable goods purchase is close to random walks. In 1985, he also studied durable goods under the framework that durable goods and non-durable goods can be temporarily replaced. The purchase has a significant impact. Bar-Ilan and Blinder (1987) established a theory of durable goods purchase, which assumes that durable goods are divisible, and each individual household will determine the scope of each durable goods inventory. Decide to buy people or sell inventory. In addition, in the study of adverse selection theory, product maintenance, new product introduction and other issues, more or less analysis of consumer behavior.