Durability and Economic Dynamics

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DOI: 10.4236/tel.2011.13025   PDF   HTML     3,624 Downloads   7,121 Views  

Abstract

This paper investigates how product’s durability affects the dynamic properties of the economy, using a simple overlapping generations model with durable goods. One of the chief characteristics of the durable-goods market is that a sale condition at a certain period affects another period’s condition. It is shown that this interaction causes oscillatory equilibria that diverge from the stationary point. Hicks [1] argued that unstable oscillations in the economy lead to endogenous business cycles. This paper’s result provides one reason of how unstable oscillations occur from firm’s optimizing behavior.

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A. Utaka, "Durability and Economic Dynamics," Theoretical Economics Letters, Vol. 1 No. 3, 2011, pp. 118-121. doi: 10.4236/tel.2011.13025.

Conflicts of Interest

The authors declare no conflicts of interest.

References

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