Author(s)

Atsuo Utaka

.

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.

Oscillatory Equilibria, Durability

Utaka, A. (2011) Durability and Economic Dynamics. Theoretical Economics Letters, 1, 118-121. doi: 10.4236/tel.2011.13025.