Forecasting Sales of Consumers’ Durable Goods

by Milton Spencer, Theodore Mattheiss



In this paper a theoretical framework that has served as a useful guide for forecasting sales of consumers' durable goods is developed and applied. Essentially, the framework consists of a set of purchase characteristics which defines the consumption environment, and a growth model, or basic equation, which expresses the relationship between new demand, replacement demand, and total demand for the particular durable good. The combination of both factors, the purchase characteristics and the growth model, provides the basis for deriving a predicting equation. In the first part of this article the theoretical framework mentioned above is outlined in sufficient detail to provide a general understanding of the nature of the problem and the approach to its solution. In the second part, an econometric model is developed of the demand for a particular durable good, namely washing machines. The most important factor determining the level toward which consumers are continually adjusting their stock of the product is the maximum ownership level, and this level itself varies depending upon such factors as purchasing power, demography, price, substitution, etc.

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