Existence of stationary equilibrium in the markets for new and used durable goods
2002; Elsevier BV; Volume: 26; Issue: 6 Linguagem: Inglês
10.1016/s0165-1889(01)00008-2
ISSN1879-1743
AutoresHideo Konishi, Michael Sandfort,
Tópico(s)Digital Platforms and Economics
ResumoWe prove the existence of stationary equilibrium in the primary and secondhand markets for an indivisible consumer durable in a general model with stochastic degradation and endogenous scrappage decisions. Unlike Rust (Econometrica 53 (1985) 783), we introduce transaction costs in the model as a motivation for consumer holdings of durables across multiple quality levels. Our technique allows for both multiple types of durables (e.g., Porsche and BMW) and relaxation of the single-crossing condition on consumer tastes. We provide a simple example showing how increasing transaction costs affect secondhand prices, eventually (for sufficiently costly transactions) closing the secondhand market altogether.
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