Planned Obsolescence as an Incentive Device for Unobservable Quality

Stressing the multi-dimensional character of quality, I propose a new theory of planned obsolescence as an incentive device that benefits consumers. I argue that planned obsolescence increases the frequency of repurchases and, therefore, enables consumers to punish producers faster for a lack of ove...

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Veröffentlicht in:The Economic journal (London) 2009-10, Vol.119 (540), p.1405-1421
1. Verfasser: Strausz, Roland
Format: Artikel
Sprache:eng
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Zusammenfassung:Stressing the multi-dimensional character of quality, I propose a new theory of planned obsolescence as an incentive device that benefits consumers. I argue that planned obsolescence increases the frequency of repurchases and, therefore, enables consumers to punish producers faster for a lack of overall quality. This strengthens the producers' incentives to provide adequate levels of quality. The theory implies a trade-off between a good's durability and its other unobservable quality attributes. This leads to an artificially high degree of obsolescence as compared to the first best where quality is observable.
ISSN:0013-0133
1468-0297
DOI:10.1111/j.1468-0297.2009.02290.x