Publication: Equilibrium Dynamics in Semi-Durable Goods Markets
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2003
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Abstract
This paper studies the dynamics that arise when time-consistent firms produce semi-durable goods and compete with an active secondary market. The paper constructs a tractable model that incorporates key elements in generating supply-side dynarnics. Thc tractability of thc model is achicvcd by specifying a linear-quadratic structurel which allows fOI a dosed-form sollltion to the 1,·farkov-perfect equilibrium and a complete characterization of its dynamics. The theory predicts a number of empirically-testable implications for the behavior of lnices and sales and their stochastic properties. Several implications are in line with availablc empirical evidence.
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Semi-durability, Secondary markets, imperfect competion, Time consistency, equilibrium dynamics