Durable Consumption. In the two-period consumption-savings framework, the representative consumer's utility mction is "(Wl'mtci'ml=h

Durable Consumption. In the two-period consumption-savings framework, the representative consumer's utility function is ,c2, , = In + V In ) + p Cln ) + V In (c? UR , in which the parameter (the Greek lowercase letter "beta") is a fixed exogenous number between zero and one, V (the Greek lowercase letter "psi") is a fixed exogenous strictly positive number, q is the period-I flow of "nondurable" consumption, c2 is the period-2 flow of "nondurable" consumption, and q and c? UR are "durable" goods in periods I and 2, respectively. I The relative prices of durable goods are and P2 in periods I and 2, respectively. As can be seen in Figure l, durable consumption goods are stock variables, not flow variables. Due to "wear and tear" of durable goods, an exogenous fraction (the Greek lowercase letter "delta") of durable goods depreciates between periods. The depreciation parameter lies between zero and one (i.e., O l). The depreciation rate for both c? UR and c? U R is identical and strictly between zero and one (that is, O < D < l), whereas the depreciation rate of any potential left-over c? UR for period 3 would, because there simply is no period 3, be (53 = I .