or built-in obsolescence
in industrial design and economics 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. 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").
Producers 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. In a competitive industry, this is a risky strategy because when consumers catch on to this, they may decide to buy from competitors instead.
Planned obsolescence tends to work best when a producer has at least an oligopoly. 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. 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. A counterexample is Moore's law
, stating that the rather competitive electronic industry plans for double computer capacity every 18 months, and the software industry plan for new program versions that require double computer capacity every 18 months.