ABSTRACT
So far it has been implicitly assumed that goods are purchased and consumed in one period. In reality, many goods are durable, providing services for long periods of time. Some examples of durable goods are cars, computers, books and recorded music. To think about durability, time needs to be introduced as a series of periods. A non-durable good provides benefit only during the period inwhich it is consumed. A durable good is not consumed in only one period, but can provide benefits over multiple periods. This introduces several complications. First, the durable good can be used more than once. Second, the durable good can be resold and used by other users. This means that the used durable good is a substitute for the new durable good produced in future periods. Durability complicates strategy for the firm and modelling for the analyst in two ways. First, the decision of both producers and consumers becomes a multi-period problem rather than a single-period problem. Decisions taken in each period will depend upon each agent’s expectations about future periods. Second, durability changes the market structure. Each owner of a durable good is a small but potential competitor of the producer of the original product.
