The dynamic adjustment of optimal durability and quality

Eitan Muller, Yoram C. Peles

Research output: Contribution to journalArticlepeer-review

Abstract

'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.

Original languageEnglish
Pages (from-to)499-507
Number of pages9
JournalInternational Journal of Industrial Organization
Volume6
Issue number4
DOIs
StatePublished - 1988

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