EconStor >
EconStor Direct >
Working and Discussion Papers / Arbeits- und Diskussionspapiere, EconStor Direct >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/50530
  
Title:The Product Life Cycle of Durable Goods PDF Logo
Authors:Kaldasch, Joachim
Issue Date:2011
Abstract:The model presented here derives the product life cycle of durable goods. It is based on the idea that the purchase process consists of first purchase and repurchase. First purchase is determined by the market penetration process (diffusion process), while repurchase is the sum of replacement and multiple purchase. The key property of durables goods is to have a mean lifetime in the order of several years. Therefore replacement purchase creates periodic variations of the unit sales (Juglar cycles) having its origin in the initial diffusion process. The theory suggests that there exists two diffusion processes. The first can be described by Bass diffusion and is related to the information spreading process within the social network of potential consumers. The other diffusion process comes into play, when the price of the durable is such, that only those consumers with a sufficient personal income can afford the good. We have to distinguish between a monopoly market and a polypoly/oligopoly market. In the first case periodic variations of the total sales occur caused by the initial Bass diffusion, even when the price is constant. In the latter case the mutual competition between the brands leads with time to a decrease of the mean price. This change is associated with an effective increase of the market volume, which can be interpreted as a diffusion process. Based on an evolutionary approach, it can be shown that the mean price decreases exponentially and the corresponding diffusion process is governed by Gompertz equation (Gompertz diffusion). Most remarkable is that Gibrat's rule of proportionate growth is a direct consequence of the competition between the brands. The model allows a derivation of the lognormal size distribution of product sales and the logistic replacement of durables in competition. A comparison with empirical data suggests that the theory describes the main trend of the product life cycle superimposed by short term events like the introduction of new models.
Subjects:Consumer Durables
Product Life Cycle
Product Diffusion
Bass Diffusion
Gompertz Diffusion
Replicator Dynamics
Logistic Growth
Evolutionary Economics
Monopoly
Gibrat's Rule
Juglar Cycles
Document Type:Preprint
Appears in Collections:Working and Discussion Papers / Arbeits- und Diskussionspapiere, EconStor Direct

Files in This Item:
File Description SizeFormat
manuscript final PLC.pdf466.62 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/50530

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.