Optimal Consumption of Durable Goods with Costly Adjustment

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The research project considers theoretically the observation that household purchases of durable goods are typically infrequent, rather than continuous. One explanation for this pattern is the existence of transactions costs that make continuous updating of the durables stock too costly. This work presents an analytical solution to the optimal consumption problem of a consumer facing transactions costs. These costs may take any of a class of forms. They may represent a linear adjustment costs or search costs, applied to either a divisible or an indivisible durable good. The infrequent purchases generated in this model may help to explain the volatility and persistence of changes in aggregate durables expenditure. The interactive component includes: al informal lunch/discussion with women faculty and graduate students from Cambridge/Boston universities, followed by a formal academic seminar by a women scholar; teaching an advanced graduate course in macroeconomics; and promoting visibility of academic and research opportunities for women through an undergraduate speakers program.