Product Innovation and Adoption in Market Equilibrium: The Case of Digital Cameras
AbstractThis paper contains an empirical dynamic model of supply and demand in the market for digital cameras with endogenous product innovation. On the demand side, heterogeneous consumers time optimally the purchase of goods depending on the expected evolution of prices and characteristics of available cameras. On the supply side, firms introduce new camera models accounting for the dynamic value of new products and the optimal behavior of consumers. The model is estimated using data from the market for digital cameras and the estimated model replicates rich dynamic features of the data. The estimated model is used to perform counterfactual computations, which suggest that more competition or lower product introduction costs generate more product variety but lower average product quality.
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Bibliographic InfoPaper provided by UNIVERSIDAD ICESI in its series BORRADORES DE ECONOMÍA Y FINANZAS with number 007127.
Date of creation: 16 Jun 2010
Date of revision:
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Durable goods; Dynamic demand; Innovation;
Other versions of this item:
- Carranza, Juan Esteban, 2010. "Product innovation and adoption in market equilibrium: The case of digital cameras," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 604-618, November.
- C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
- D10 - Microeconomics - - Household Behavior - - - General
- L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-06-26 (All new papers)
- NEP-CMP-2010-06-26 (Computational Economics)
- NEP-COM-2010-06-26 (Industrial Competition)
- NEP-IND-2010-06-26 (Industrial Organization)
- NEP-INO-2010-06-26 (Innovation)
- NEP-MIC-2010-06-26 (Microeconomics)
- NEP-MKT-2010-06-26 (Marketing)
- NEP-TID-2010-06-26 (Technology & Industrial Dynamics)
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