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Planned Obsolescence and Social Welfare

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  • Atsuo Utaka

    (Kyoto University)

Abstract

Durable-goods marketing has an obsolescence effect on older models. I consider two cases: commitment (where the decision on how much to invest in marketing is made in the first period) and noncommitment (where the decision is made in the second period). I focus on the fact that the introduction of a higher quality model lowers the utility of consumers using an older model. I show that, in both cases, the equilibrium level of marketing rises above the socially optimal level. The point is that a larger obsolescence effect promotes replacement demand, driving the monopolist to spend more than is socially optimal.

Suggested Citation

  • Atsuo Utaka, 2006. "Planned Obsolescence and Social Welfare," The Journal of Business, University of Chicago Press, vol. 79(1), pages 137-148, January.
    • Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:1:p:137-148
    DOI: 10.1086/497408
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    Cited by:

    1. Joseph Guiltinan, 2010. "Consumer durables replacement decision-making: An overview and research agenda," Marketing Letters, Springer, vol. 21(2), pages 163-174, June.
    2. Utaka, Atsuo, 2008. "Pricing strategy, quality signaling, and entry deterrence," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 878-888, July.
    3. Atsuo Utaka, 2022. "Clearance sales and new product introduction," The Japanese Economic Review, Springer, vol. 73(3), pages 539-554, July.
    4. Atsuo Utaka, 2015. "High Price Strategy and Quality Signalling," The Japanese Economic Review, Japanese Economic Association, vol. 66(3), pages 408-420, September.
    5. Kuppelwieser, Volker G. & Klaus, Phil & Manthiou, Aikaterini & Boujena, Othman, 2019. "Consumer responses to planned obsolescence," Journal of Retailing and Consumer Services, Elsevier, vol. 47(C), pages 157-165.

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