MODELING THE CONSUMERS DECISION TO REPLACE DURABLE GOODS - A HAZARD FUNCTION-APPROACH

This article analyses the consumer's durable good replacement decision using hazard models. In contrast to the typical limited dependent var iable model often used in durable good demand studies, hazard models a llow for much richer relationships between the ages of durable goods a nd the probabilities of their replacement. To illustrate the technique , a recursive system consisting of a regression equation and a hazard model is used to examine home heating system replacement decisions by residential customers of a major southeastern US electric utility. The results indicate that overall system replacement rates decline over t ime, and that the probability of replacement for specific households d epends negatively on the age of the head of household and the availabi lity of natural gas, and positively on system age and higher than expe cted household energy use.