Asset and commodity prices with multi-attribute durable goods

We consider a pure exchange representative a;ent economy with perishable and durable commodities in which the durable good provides status as well as services. We examine the effects of the durable's attributes on demands and equilibrium prices. When the attributes are perfect substitutes, irreversibility of the durable's purchases may cause temporary excesses of actual services over their desired level. Stickiness in adjustment is asymmetric since increases in desired status level are met by immediate purchases. We show that the equilibrium interest rate depends, in particular, on the growth rates of the durable's attributes and that asset risk premia satisfy a two-beta consumption CAPM, Conditions under which durability increases asset risk premia are provided.