Planned obsolescence or built-in obsolescence[1] in industrial design is a policy of planning or designing a product with an artificially limited useful life, so it will become obsolete, that is, unfashionable or no longer functional after a certain period of time.[2] The rationale behind the strategy is to generate long-term sales volume by reducing the time between repeat purchases (referred to as "shortening the replacement cycle").
Firms that pursue this strategy believe that the additional sales revenue it creates more than offsets the additional costs of research and development and opportunity costs of existing product line cannibalization. The rewards are by no means certain: in a competitive industry, this can be a risky strategy because consumers may decide to buy from competitors.
Planned obsolescence tends to work best when a producer has at least an oligopoly.[3] Before introducing a planned obsolescence, the producer has to know that the consumer is at least somewhat likely to buy a replacement from them In these cases of planned obsolescence, there is an information asymmetry between the producer – who knows how long the product was designed to last – and the consumer, who does not. When a market becomes more competitive, product lifespans tend to increase.[citation needed] For example, when Japanese vehicles with longer lifespans entered the American market in the 1960s and 1970s, American carmakers were forced to respond by building more durable products.[4]
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