Consumption, Durable Goods, and Transaction Costs
- Tags:
- Business Operations,
- Consumption,
- Corporate Governance,
- Corporate Law,
- Durable Goods,
- Real Estate,
- Transaction Cost
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Overview: The paper studies consumption of durable and nondurable goods when the durable good is subject to transaction costs. In the model, agents derive utility from a service flow of a durable good and a consumption flow of a nondurable good. The key feature of the model is the existence of a fixed transaction cost in the durable good market. The fixed cost induces an inaction region in the purchase of the durable good. More importantly, the inability to adjust the durable stock induces variation in consumption of the nondurable good over the inaction region.
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Format: PDF | Size: 604KB | Date: Jan 2003 | Pages: 50
