Monopoly Power and the Durability of Durable Goods

The inadequacy of mere price-quantity analysis was clearly pointed out by Edward H. Chamberlin several years ago.' Professor Chamberlin focused attention upon the fact that, in spite of the generally accepted procedure of assuming to be given while studying price quantity relationships, products are actually the most volatile things in the economic system--much more so than prices.2 Among many variable aspects of a product, he mentions its durability as one that is not only exceedingly variable but quite measurable. Since it is variable, the producer has to face the question of how durable to make his product. Evidently if he makes it too durable, as soon as people have bought one unit they will not need another for a substantial period during which there will be no 'repeat demand' for his product. He has an interest then in making it less durable so that people will come back that much sooner to buy another unit. On the other hand, just as he must not set his price too high, so he must not offer a product which wears out too fast in comparison with others on the market. The problem is to find that length of life for his product which will maximize his profit.' Chamberlin raises the question: What governs the durability of different types of products, and under different conditions of competition and monopoly; and how does the optimum defined by profit maximization compare with standards defined by a public interest or welfare criterion ?' Considering the obvious importance of this question, it is surprising that so little has been said about it in the literature.5