R&D and product obsolescence |
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Authors: | Gregory E. Goering John R. Boyce James M. Collins |
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Affiliation: | 1. Department of Economics, University of Alaska, 99775-0580, Fairbanks, Alaska 2. Department of Business Administration, University of Alaska, 99775-0580, Fairbanks, Alaska
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Abstract: | Claims of planned obsolescence have often been made by various consumer groups. Bulow (1986) examined a monopolist's choice of product durability and found that firms who sell their products tend to choose lower durability levels than firms that rent. We argue that the speed of new product development may be a more appropriate proxy for obsolescence than is durability. Reformulating Bulow's model in terms of R&D choice rather than durability choice, we find that sales firms engage in higher levels of R&D than do rental firms. Additionally, we provide an empirical example using data from the copier and computer industries which also suggests a strong positive relationship between the R&D intensity of a firm and the proportion of output sold versus rented. |
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Keywords: | Innovation obsolescence |
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