TITLE:
Durability and Economic Dynamics
AUTHORS:
Atsuo Utaka
KEYWORDS:
Oscillatory Equilibria, Durability
JOURNAL NAME:
Theoretical Economics Letters,
Vol.1 No.3,
November
7,
2011
ABSTRACT: This paper investigates how product’s durability affects the dynamic properties of the economy, using a simple overlapping generations model with durable goods. One of the chief characteristics of the durable-goods market is that a sale condition at a certain period affects another period’s condition. It is shown that this interaction causes oscillatory equilibria that diverge from the stationary point. Hicks [1] argued that unstable oscillations in the economy lead to endogenous business cycles. This paper’s result provides one reason of how unstable oscillations occur from firm’s optimizing behavior.