Durable Goods Markets

Products are said to be durable if they provide services to their users over an extended period of time. This means that they cannot be completely consumed in one or few uses. Typical examples of durable goods are automobiles, consumer electronics, and home appliances. Durable goods differ in several aspects from non-durable goods, such as food and fuel. They can be sold and rented out. Durability also usually implies that a second-hand market exists as used units can be resold by their owners. Finally, durable goods producers can control the services provided to consumers not only by determining output but also durability. This often raises concern by policymakers and consumers that manufacturers might have an incentive to practice planned obsolescence. This book provides an extensive literature review dealing with these topics. In addition, it extends the literature in two ways. First, it is analyzed how commodity taxation affects market outcomes in a durable goods market, such as durability choice and market power of a manufacturer. Policy implications for regulators are discussed. Second, it is examined how the complexity of a product affects the reliability of its individual components, which in turn determines the overall reliability of the product and hence its durability.