On Consumption Indivisibilities, the Demand for Durables, and Income Distribution

This paper presents a framework to assess demand of durable products recognizing their indivisibility. The paper builds on the household production framework recognizing consumers demand for product characteristics and this demand can be satisfied by purchasing durables that combined with variable inputs to generate these characteristics or renting services that provide these characteristics. One example is buying a washer and dryer or going to a laundromat. Our analysis recognizes heterogeneity among consumers and suggests that some segments of the population will buy the durables while others will rent. We derived demand for the durables and associated variable inputs by aggregating over population. We show the demands are affected by prices and income distribution parameters.