TY - JOUR
T1 - The dynamic adjustment of optimal durability and quality
AU - Muller, Eitan
AU - Peles, Yoram C.
PY - 1988
Y1 - 1988
N2 - 'They don't make them like they used to' is a well-known adage which is investigated in this paper. We show that when the marginal cost with respect to durability or quality per unit of production does not increase with production then: (a) A competitive firm and a monopolist will choose an optimal durability or quality path that decreases over time. (b) The more likely it is that quality and quantity are substitutes, either in consumption or production, the more likely it is that quality will deteriorate over time, as the market approaches the steady state. (c) Substitutability of quality and durability will tend to drive quality down even faster when durability declines.
AB - 'They don't make them like they used to' is a well-known adage which is investigated in this paper. We show that when the marginal cost with respect to durability or quality per unit of production does not increase with production then: (a) A competitive firm and a monopolist will choose an optimal durability or quality path that decreases over time. (b) The more likely it is that quality and quantity are substitutes, either in consumption or production, the more likely it is that quality will deteriorate over time, as the market approaches the steady state. (c) Substitutability of quality and durability will tend to drive quality down even faster when durability declines.
UR - http://www.scopus.com/inward/record.url?scp=38249030801&partnerID=8YFLogxK
U2 - 10.1016/S0167-7187(88)80006-7
DO - 10.1016/S0167-7187(88)80006-7
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AN - SCOPUS:38249030801
SN - 0167-7187
VL - 6
SP - 499
EP - 507
JO - International Journal of Industrial Organization
JF - International Journal of Industrial Organization
IS - 4
ER -