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The Life Cycle of Products: Evidence and Implications

Author

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  • David Argente
  • Munseob Lee
  • Sara Moreira

Abstract

We document that sales of individual products decline steadily throughout most of the product life cycle. Products quickly become obsolete as they face competition from newer products sold by competing firms and the same firm. We build a dynamic model that highlights an innovation-obsolescence cycle, where firms need to introduce new products to grow; otherwise, their portfolios become obsolete as rivals introduce their own new products. By introducing new products, however, firms accelerate the decline of their own existing products, further depressing their sales. This mechanism has sizable implications for quantifying economic growth and the impact of innovation policies.

Suggested Citation

  • David Argente & Munseob Lee & Sara Moreira, 2024. "The Life Cycle of Products: Evidence and Implications," Journal of Political Economy, University of Chicago Press, vol. 132(2), pages 337-390.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/726704
    DOI: 10.1086/726704
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    Cited by:

    1. Rafael R. Guthmann, 2024. "Price dispersion in dynamic competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(4), pages 1203-1232, December.
    2. Karam Jo & Seula Kim, 2024. "Competition, Firm Innovation, and Growth under Imperfect Technology Spillovers," Working Papers 24-40, Center for Economic Studies, U.S. Census Bureau.

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