IDEAS home Printed from https://ideas.repec.org/p/eti/dpaper/20033.html
   My bibliography  Save this paper

Declining Demand and Product Quality: An Empirical Study of the Japanese PC Monitor Market

Author

Listed:
  • OTA Rui
  • ZHANG Lili

Abstract

As evinced by the dumping phenomenon caused by the rapid economic growth of developing countries, many markets in advanced economies have rapidly declined. In such declining markets, however, the price of domestic products has been increasing instead of decreasing. To understand price increases in a declining market due to the rush in imports of new products, this paper empirically investigates changes in product quality using POS data on PC monitors sold at major mass retailers in Japan (January 2009--December 2011). The paper utilizes the hedonic approach to estimate the impact of product features on price. As a result of calculating the Quality Index developed by Feenstra (1988) with the estimates, this paper demonstrates that the quality of Japanese PC monitors increased by 6.6% in 2010 (compared to the previous year) and 8.5% in 2011. The result shows that the price increase in a declining market can be explained by increasing product quality.

Suggested Citation

  • OTA Rui & ZHANG Lili, 2020. "Declining Demand and Product Quality: An Empirical Study of the Japanese PC Monitor Market," Discussion papers 20033, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:20033
    as

    Download full text from publisher

    File URL: https://www.rieti.go.jp/jp/publications/dp/20e033.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Reynolds, Stanley S, 1988. "Plant Closings and Exit Behaviour in Declining Industries," Economica, London School of Economics and Political Science, vol. 55(220), pages 493-503, November.
    2. Robert C. Feenstra, 1988. "Quality Change Under Trade Restraints in Japanese Autos," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(1), pages 131-146.
    3. Francisco Requena‐Silvente & James Walker, 2006. "Calculating Hedonic Price Indices with Unobserved Product Attributes: An Application to the UK Car Market," Economica, London School of Economics and Political Science, vol. 73(291), pages 509-532, August.
    4. John Londregan, 1990. "Entry and Exit over the Industry Life Cycle," RAND Journal of Economics, The RAND Corporation, vol. 21(3), pages 446-458, Autumn.
    5. Peter F. Colwell & Gene Dilmore, 1999. "Who Was First? An Examination of an Early Hedonic Study," Land Economics, University of Wisconsin Press, vol. 75(4), pages 620-626.
    6. Ariel Pakes, 2003. "A Reconsideration of Hedonic Price Indexes with an Application to PC's," American Economic Review, American Economic Association, vol. 93(5), pages 1578-1596, December.
    7. C. Lanier Benkard & Patrick Bajari, 2005. "Hedonic Price Indexes With Unobserved Product Characteristics, and Application to Personal Computers," Journal of Business & Economic Statistics, American Statistical Association, vol. 23, pages 61-75, January.
    8. Patrick Bajari & C. Lanier Benkard, 2005. "Demand Estimation with Heterogeneous Consumers and Unobserved Product Characteristics: A Hedonic Approach," Journal of Political Economy, University of Chicago Press, vol. 113(6), pages 1239-1276, December.
    9. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
    10. Michael D. Whinston, 1988. "Exit with Multiplant Firms," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 568-588, Winter.
    11. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    12. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    13. Rui Ota, 2011. "Dynamic Pricing in Declining Demand: The Case of Duopoly," Review of Development Economics, Wiley Blackwell, vol. 15(1), pages 78-92, February.
    14. Arthur Fishman, 1990. "Entry Deterrence in a Finitely-Lived Industry," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 63-71, Spring.
    15. Tim Erickson & Ariel Pakes, 2011. "An Experimental Component Index for the CPI: From Annual Computer Data to Monthly Data on Other Goods," American Economic Review, American Economic Association, vol. 101(5), pages 1707-1738, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Erica L. Groshen & Brian C. Moyer & Ana M. Aizcorbe & Ralph Bradley & David M. Friedman, 2017. "How Government Statistics Adjust for Potential Biases from Quality Change and New Goods in an Age of Digital Technologies: A View from the Trenches," Journal of Economic Perspectives, American Economic Association, vol. 31(2), pages 187-210, Spring.
    2. Wong, Maisy, 2018. "A tractable approach to compare the hedonic and discrete choice frameworks," Journal of Housing Economics, Elsevier, vol. 41(C), pages 135-141.
    3. Patrick Bayer & Fernando Ferreira & Robert McMillan, 2007. "A Unified Framework for Measuring Preferences for Schools and Neighborhoods," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 588-638, August.
    4. Wong, Maisy, 2010. "The Relationship between Marginal Willingness-to-Pay in the Hedonic and Discrete Choice Models," MPRA Paper 51218, University Library of Munich, Germany.
    5. Ko, Kate, 2009. "Home Prices and Urban Corridors," 50th Annual Transportation Research Forum, Portland, Oregon, March 16-18, 2009 207607, Transportation Research Forum.
    6. Lars Nesheim, 2006. "Hedonic price functions," CeMMAP working papers CWP18/06, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    7. Gautam Gowrisankaran & Marc Rysman, 2012. "Dynamics of Consumer Demand for New Durable Goods," Journal of Political Economy, University of Chicago Press, vol. 120(6), pages 1173-1219.
    8. Xosé-Luís Varela-Irimia, 2014. "Age effects, unobserved characteristics and hedonic price indexes: The Spanish car market in the 1990s," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 5(4), pages 419-455, November.
    9. Arjen van Witteloostuijn, 1998. "Bridging Behavioral and Economic Theories of Decline: Organizational Inertia, Strategic Competition, and Chronic Failure," Management Science, INFORMS, vol. 44(4), pages 501-519, April.
    10. Mariuzzo, Franco & Walsh, Patrick Paul & Whelan, Ciara, 2010. "Coverage of retail stores and discrete choice models of demand: Estimating price elasticities and welfare effects," International Journal of Industrial Organization, Elsevier, vol. 28(5), pages 555-578, September.
    11. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    12. Mathilde Poulhes, 2017. "From Latin Quarter to Montmartre Investigating Parisian Real-Estate Prices," Working Papers 2017-13, Center for Research in Economics and Statistics.
    13. Ralph Siebert, 2015. "The Impact of Foreclosure on Housing Prices," CESifo Working Paper Series 5196, CESifo.
    14. Richards, Timothy J. & Patterson, Paul M. & Hamilton, Stephen F., 2007. "Fast Food, Addiction, and Market Power," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 32(3), pages 1-23, December.
    15. Ge, Suqin & Macieira, João, 2020. "Unobserved Worker Quality and Inter-Industry Wage Differentials," GLO Discussion Paper Series 491, Global Labor Organization (GLO).
    16. Richards, Timothy J. & Acharya, Ram N. & Kagan, Albert, 2008. "Spatial competition and market power in banking," Journal of Economics and Business, Elsevier, vol. 60(5), pages 436-454.
    17. Rachel Griffith & Lars Nesheim & Martin O'Connell, 2018. "Income effects and the welfare consequences of tax in differentiated product oligopoly," Quantitative Economics, Econometric Society, vol. 9(1), pages 305-341, March.
    18. Bichescu, Bogdan & Raturi, Amitabh, 2015. "The antecedents and consequences of plant closing announcements," International Journal of Production Economics, Elsevier, vol. 168(C), pages 197-210.
    19. Johannes Van Biesebroeck & Aamir Hashmi, 2007. "Market Structure and Innovation: A Dynamic Analysis of the Global Automobile Industry," 2007 Meeting Papers 362, Society for Economic Dynamics.
    20. Leung, Tin Cheuk & Tsang, Kwok Ping, 2012. "Love thy neighbor: Income distribution and housing preferences," Journal of Housing Economics, Elsevier, vol. 21(4), pages 322-335.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eti:dpaper:20033. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: TANIMOTO, Toko (email available below). General contact details of provider: https://edirc.repec.org/data/rietijp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.