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Faster, smaller, cheaper: an hedonic price analysis of PDAs

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  • P. D. Chwelos
  • E. R. Berndt
  • I. M. Cockburn

Abstract

We compute quality-adjusted price indexes for personal digital assistants (PDAs) for the period 1999 to 2004. Hedonic regressions indicate that prices are related to processor generation and clock speed, memory capacity, screen size and quality and the presence of a digital camera or wireless capability. A particularly salient feature of PDAs is portability, where we find: (i) purchasers value the energy density of the battery technology (e.g. lithium ion) rather than the battery life in hours; and (ii) the physical characteristics of the PDA (e.g. weight, volume) are nonlinearly related to price, suggesting that valuation of the physical form of PDAs does not bear a simple linear relationship to characteristics, either in absolute terms ('smaller is better') or vs. an ergonomic 'sweet spot'. Rather, portability characteristics are correlated with other desirable attributes, making the relationship between price and portability difficult to disentangle. However, hedonic price indexes are robust across different measures of the portability of PDAs. Hedonic indexes using the dummy variable, characteristics prices, and imputation approaches decline on average between 19 and 26% per year. A matched model price index computed from a subset of observations declines at 19% per year, while a fixed-effects hedonic index declines at 14% per year.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 40 (2008)
Issue (Month): 22 ()
Pages: 2839-2856

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Handle: RePEc:taf:applec:v:40:y:2008:i:22:p:2839-2856

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  1. Terry Baker, 1997. "Quality-adjusted price indexes for portable computers," Applied Economics, Taylor & Francis Journals, vol. 29(9), pages 1115-1123.
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Cited by:
  1. Varela-Irimia, Xosé-Luís, 2011. "Age effects, unobserved characteristics and hedonic price indexes: The Spanish car market in the 1990's," Working Papers 2072/169683, Universitat Rovira i Virgili, Department of Economics.
  2. Stephen D. Oliner & Daniel E. Sichel & David M. Byrne, 2013. "Is the information technology revolution over?," Working Papers 37301, American Enterprise Institute.
  3. Robert J. Gordon, 2006. "The Boskin Commission Report: A Retrospective One Decade Later," NBER Working Papers 12311, National Bureau of Economic Research, Inc.
  4. Naoki Watanabe & Ryo Nakajima & Takanori Ida, 2010. "Quality-Adjusted Prices of Japanese Mobile Phone Handsets and Carriers’ Strategies," Review of Industrial Organization, Springer, vol. 36(4), pages 391-412, June.
  5. Carol A. Robbins, 2006. "R&D Expenditures for the U.S.: A Frascati to System of National Accounts Application to U.s. Data," BEA Papers 0063, Bureau of Economic Analysis.

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