Firm Utilization of Perceived Obsolescence

Firm Utilization of Perceived Obsolescence

Ace Kim

Northern Valley Regional High School at Old Tappan

Perceived obsolescence has been displayed experimentally in many situations, but remains understudied theoretically. We develop a model of consumer demand, where firms aim to maximize their profit from consumers who enjoy network benefits from updated products. Firms face two key choices, pricing and whether to obsolete their product through introducing a new mod-el. In this paper, we demonstrate that perceived obsolescence can be an effective strategy for firms, but must be employed with caution. We then use our findings to derive several testable implications that enable businesses to determine for themselves whether perceived obsolescence can be a viable strategy for them. In particular, we categorize the key differences in optimal strategies between firms that sell products with network benefits, such as social media products, as opposed to those that sell status symbols, such as watches.

Keywords: Firm Utilization; Perceived Obsolescence

Free Full-text PDF

How to cite this article:
Ace Kim. Firm Utilization of Perceived Obsolescence. Global journal of Economics and Business Administration, 2021, 6:36. DOI:10.28933/gjeba-2021-09-1605

1. Bulow, Jeremy, “An economic theory of planned obsolescence,” The Quarterly Journal of Economics, 1986, 101 (4), 729–749.
2. Fels, Antonia, Bj¨orn Falk, and Robert Schmitt, “Social media analysis of perceived product obsolescence,” Procedia CIRP, 2016, 50, 571–576.
3. Forman, Laura, “Facebook Ads Could Be Reaching Saturation Point,” https://www.
4. Koca, Esma, Tommaso Valletti, and Wolfram Wiesemann, “Designing Digital Rollovers: anaging Perceived Obsolescence through Release Times,” Production and Operations Man-agement, 2021.
5. Krajewski, Markus, “The Great Lightbulb Conspiracy,” the-great-lightbulb-conspiracy 2014.
6. Lewis, Sharon, “Planned Obsolescence, And Other Open Secrets Of The Fashion Industry,” 2020.
7. London, Bernard, “Ending the depression through planned obsolescence,” Revue du MAUSS, 2014, pp. 47–50.
8. Tassi, Paul, “Why its scary when 0.15% of mobile gamers bring in 50% of the revenue,” why-its-scary-when-0-15-mobile-gamers-bring-in-50-of-the-revenue/?sh=79b38ed40659 2014.

Terms of Use/Privacy Policy/ Disclaimer/ Other Policies:
You agree that by using our site, you have read, understood, and agreed to be bound by all of our terms of use/privacy policy/ disclaimer/ other policies (click here for details).

This work and its PDF file(s) are licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.