Optimal dynamic durability

Eitan Muller, Yoram C. Peles

Research output: Contribution to journalArticlepeer-review

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 languageEnglish
Pages (from-to)709-719
Number of pages11
JournalJournal of Economic Dynamics and Control
Volume14
Issue number3-4
DOIs
StatePublished - 1990

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