Bayus, Barry L.
June 1992
Marketing Science;Summer92, Vol. 11 Issue 3, p251
Academic Journal
Learning curve effects, aspects of consumer demand models (e.g., reservation price distributions, intertemporal utility maximizing behavior), and competitive activity are reasons which have been offered to explain why prices of new durables decline over time. This paper presents an alternative rationale based on the buying behavior for products with overlapping replacement cycles (i.e., next generation products). A model for consumer sales of a new durable is developed by incorporating the replacement behavior of a previous generation product. Pricing strategies for two product generations are investigated analytically and with numerical methods. Results indicate that durable replacement behavior leads to a wider set of optimal pricing strategies than previously obtained. Several empirical illustrations of industry pricing practices for successive product generations are also shown to be consistent with the theoretical results. Finally, various areas for future research are outlined.


Related Articles

  • Business Investment, Durable Goods Orders Strengthen. ANDREA RIQUIER // Investors Business Daily;8/26/2015, p00 

    The article reports on the strengthening and rise of orders of durable goods in the U.S. in July 2015.

  • FORECASTING SALES OF CONSUMERS' DURABLE GOODS. Spencer, Milton H.; Mattheiss, Theodore // California Management Review;Spring62, Vol. 4 Issue 3, p75 

    Can demand and consequently the market for consumers' durable goods be reduced to a mathematical model? Yes, these business economists contend, provided the right framework is chosen and proper statistical correlations are made to compensate for those eternal marketing variables -- price,...

  • COMMENT. Sarris, Michael // American Economist;Spring71, Vol. 15 Issue 1 

    Comments on an article by D. Breeden and D. Ciscel in the March 1971 issue of 'The American Economist' on the inclusion of the demand for durable goods in consumer demand theory. Relationship between wealth and durable purchases; Decline in the demand for durables over time; Distribution of...

  • STOCK ANALYSIS OF DEMAND: SOME IMPLICATIONS. Breeden, Dennis; Ciscel, David H. // American Economist;Spring71, Vol. 15 Issue 1 

    Proposes a theory of consumer demand that includes durable goods in the consumer's consumption pattern. Exclusion of durability in traditional methods for developing demand theory; Factors that may shorten the life of products; Built-in bias against increasing the durability of products; Nature...

  • A SIMPLE DURABLE GOODS MODEL. Levine, David // Quarterly Journal of Economics;Aug85, Vol. 100 Issue 3, p775 

    The durability of a good has two implications. First, it can be stored in inventories by producers. Second, if it provides a stream of services to consumers, consumers may wish to defer purchases to take advantage of price fluctuations. The most significant conclusion is that the stockpiling of...

  • Durable Goods Orders Jump 2.6% in March; Ex-Transportation Rise 2.0%. Siegel, Gary // Bond Buyer;4/25/2014, Vol. 123 Issue F316, p1 

    The article focuses on a report of the U.S. Commerce Department which states that the U.S. durable goods orders increased by 2.6 percent in March 2014 while the excluding transportation orders increased by two percent in the same period.

  • Consumer durable makers hope sales rise this festive season.  // FRPT- FMCG Snapshot;8/31/2014, p35 

    The article reports on the hope of Indian consumer durable manufacturers for sales to increase during the 2014 festive season, following two years of minimal sales growth. Topics discussed include the challenge posed by poor monsoon rain in north and central India, and the optimism based on...

  • Liquidity Constraints and Intertemporal Consumer Optimization: Theory and Evidence from Durable Goods. Chah, Eun Young; Ramey, Valerie A.; Starr, Ross M. // Journal of Money, Credit & Banking (Ohio State University Press);Feb95, Vol. 27 Issue 1, p272 

    The article focuses on addressing the theoretical-practical discrepancies of intertemporal optimization of individual finance commonly modeled through liquidity constraints. An optimal consumption behavior theory in consideration of borrowing constraints is presented to correct the imbalance,...

  • vital statistics. Pearlman, Arnold // Chemical Week;11/21/2007, Vol. 169 Issue 38, p44 

    The article looks at the economic conditions in the U.S. for the third quarter of 2007. The economy grew at an annualized rate of 3.9% in the quarter, about the same as the 3.8% recorded in previous three months. The growth was propelled by a resurgence in consumer spending, particularly for...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics