Abstract
Consider a firm that adjusts its production and the choice of durability for its products instantaneously. We show that when the marginal cost with the respect to durability is nonincreasing, (a) the optimal durability for both the competitive firm and the monopolist decreases over time and (b) the monopolist will produce a good with lower durability than the competitive firm. We thus lend support for empirical findings and causal observations that found the phenomenon of declining durability over time.
| Original language | English |
|---|---|
| Pages (from-to) | 709-719 |
| Number of pages | 11 |
| Journal | Journal of Economic Dynamics and Control |
| Volume | 14 |
| Issue number | 3-4 |
| DOIs | |
| State | Published - 1990 |