Valuing Consumer Products by the Time Spent Using Them: An Application to the Internet
AbstractFor some goods, the main cost of buying the product is not the price but rather the time it takes to use them. Only about 0.2% of consumer spending in the U.S., for example, went for Internet access in 2004 yet time use data indicates that people spend around 10% of their entire leisure time going online. For such goods, estimating price elasticities with expenditure data can be difficult, and, therefore, estimated welfare gains highly uncertain. We show that for time-intensive goods like the Internet, a simple model in which both expenditure and time contribute to consumption can be used to estimate the consumer gains from a good using just the data on time use and the opportunity cost of people's time (i.e., the wage). The theory predicts that higher wage internet subscribers should spend less time online (for non-work reasons) and the degree to which that is true identifies the elasticity of demand. Based on expenditure and time use data and our elasticity estimate, we calculate that consumer surplus from the Internet may be around 2% of full-income, or several thousand dollars per user. This is an order of magnitude larger than what one obtains from a back-of-the-envelope calculation using data from expenditures.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11995.
Date of creation: Feb 2006
Date of revision:
Note: EFG IO PR
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Austan Goolsbee & Peter J. Klenow, 2006. "Valuing Consumer Products by the Time Spent Using Them: An Application to the Internet," American Economic Review, American Economic Association, vol. 96(2), pages 108-113, May.
- Austan Goolsbee & Peter J. Klenow, 2006. "Valuing Consumer Products by the Time Spent Using Them: An Application to the Internet," Discussion Papers 05-010, Stanford Institute for Economic Policy Research.
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-26 (All new papers)
- NEP-ICT-2006-02-26 (Information & Communication Technologies)
- NEP-MKT-2006-02-26 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Austan Goolsbee & Peter J. Klenow, 1999.
"Evidence on Learning and Network Externalities in the Diffusion of Home Computers,"
NBER Working Papers
7329, National Bureau of Economic Research, Inc.
- Goolsbee, Austan & Klenow, Peter J, 2002. "Evidence on Learning and Network Externalities in the Diffusion of Home Computers," Journal of Law and Economics, University of Chicago Press, vol. 45(2), pages 317-43, October.
- Downes, Tom & Greenstein, Shane, 2002. "Universal access and local internet markets in the US," Research Policy, Elsevier, vol. 31(7), pages 1035-1052, September.
- Timothy F. Bresnahan & Robert J. Gordon, 1996. "The Economics of New Goods," NBER Books, National Bureau of Economic Research, Inc, number bres96-1.
- Amil Petrin, 2002. "Quantifying the Benefits of New Products: The Case of the Minivan," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 705-729, August.
- Mark Aguiar & Erik Hurst, 2005. "Consumption versus Expenditure," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 919-948, October.
- Aviv Nevo, 2003.
"New Products, Quality Changes, and Welfare Measures Computed from Estimated Demand Systems,"
The Review of Economics and Statistics,
MIT Press, vol. 85(2), pages 266-275, May.
- Aviv Nevo, 2001. "New Products, Quality Changes and Welfare Measures Computed From Estimated Demand Systems," NBER Working Papers 8425, National Bureau of Economic Research, Inc.
- Hausman, Jerry, 1999.
"Cellular Telephone, New Products, and the CPI,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 17(2), pages 188-94, April.
- Austan Goolsbee & Amil Petrin, 2004. "The Consumer Gains from Direct Broadcast Satellites and the Competition with Cable TV," Econometrica, Econometric Society, vol. 72(2), pages 351-381, 03.
- Jeremy Greenwood & Karen A. Kopecky, 2007.
"Measuring the Welfare Gain from Personal Computers,"
Economie d'Avant Garde Research Reports
15, Economie d'Avant Garde.
- Jeremy Greenwood & Karen A. Kopecky, 2013. "Measuring The Welfare Gain From Personal Computers," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 336-347, 01.
- Karen A. Kopecky & Jeremy Greenwood, 2008. "Measuring the Welfare Gain from Personal Computers," 2008 Meeting Papers 491, Society for Economic Dynamics.
- Pollock, R., 2009. "The Economics of Public Sector Information," Cambridge Working Papers in Economics 0920, Faculty of Economics, University of Cambridge.
- Alcalá Francisco, 2009.
"Time, Quality and Growth,"
201052, Fundacion BBVA / BBVA Foundation.
- De Vries, Gary & De Vries, Pierre, 2007. "The Role of Licence-Exemption in Spectrum Reform," MPRA Paper 6847, University Library of Munich, Germany.
- Michelle Connolly & James Prieger, 2009. "Economics at the FCC, 2008–2009: Broadband and Merger Review," Review of Industrial Organization, Springer, vol. 35(4), pages 387-417, December.
- Jeremy Greenwood & Karen A. Kopecky, 2011.
"Measuring the Welfare Gain from Personal Computers: A Macroeconomic Approach,"
RCER Working Papers
559, University of Rochester - Center for Economic Research (RCER).
- Jeremy Greenwood & Karen A. Kopecky, 2007. "Measuring the Welfare Gain from Personal Computers: A Macroeconomic Approach," NBER Working Papers 13592, National Bureau of Economic Research, Inc.
- Karen A. Kopecky & Jeremy Greenwood, 2011. "Measuring the welfare gain from personal computers: a macroeconomic approach," Working Paper 2011-05, Federal Reserve Bank of Atlanta.
- Pénard, Thierry & Poussing, Nicolas & Suire, Raphaël, 2013.
"Does the Internet make people happier?,"
The Journal of Socio-Economics,
Elsevier, vol. 46(C), pages 105-116.
- PENARD Thierry & POUSSING Nicolas & SUIRE Raphaël, 2011. "Does the Internet make people happier?," CEPS/INSTEAD Working Paper Series 2011-41, CEPS/INSTEAD.
- Thierry Pénard & Nicolas Poussing & Raphaël Suire, 2013. "Does the Internet make people happier?," Post-Print halshs-00864314, HAL.
- Thierry Pénard & Nicolas Poussing & Raphaël Suire, 2011. "Does the Internet make people happier ?," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201106, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
- Maxime Agbo & Marc Santugini & Jonathan W. Williams, 2012. "Price Discrimination of Congestible Network Goods," Cahiers de recherche 1239, CIRPEE.
- Hersh, Jonathan & Voth, Hans-Joachim, 2009.
"Sweet Diversity: Colonial Goods and the Rise of European Living Standards after 1492,"
CEPR Discussion Papers
7386, C.E.P.R. Discussion Papers.
- Jonathan Hersh & Joachim Voth, 2009. "Sweet diversity: Colonial goods and the rise of European living standards after 1492," Economics Working Papers 1163, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2011.
- Punj, Girish, 2012. "Income effects on relative importance of two online purchase goals: Saving time versus saving money?," Journal of Business Research, Elsevier, vol. 65(5), pages 634-640.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.