Existence of stationary equilibrium in the markets for new and used durable goods (Q5958249)
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scientific article; zbMATH DE number 1715250
Language | Label | Description | Also known as |
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English | Existence of stationary equilibrium in the markets for new and used durable goods |
scientific article; zbMATH DE number 1715250 |
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Existence of stationary equilibrium in the markets for new and used durable goods (English)
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3 March 2002
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We 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 \textit{J. Rust} [Econometrica 53, 783-805 (1985; Zbl 0611.90021)], 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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stationary equilibrium
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transaction costs
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secondhand prices
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