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Price Deflators for High Technology Goods and the New Buyer Problem

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Author Info

  • Ana Aizcorbe

    (Bureau of Economic Analysis)

Abstract

Some items in a household’s market basket, notably durable goods, are purchased only occasionally. In contrast, standard price measures implicitly assume that consumers purchase some amount of every available good in every period. The occasional purchase of an existing good by a new buyer generates a “new buyer” problem that is similar to the traditional “new goods” problem generated by the entry of new goods. This paper uses an idea introduced by Fisher and Griliches (1995) and Griliches and Cockburn (1995) to develop price indexes for goods that are not purchased in each period. A comparison of the resulting price indexes with those calculated under the standard assumption suggests that the sharp declines typically exhibited by price indexes for many high technology goods may be overstated. However, it is impossible to make any definitive statements about the numerical magnitude of this potential problem. These preliminary findings simply underscore the importance of further research to study this problem for high tech goods and to explore the possibility that similar problems may arise for other durable goods.

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File URL: http://128.118.178.162/eps/io/papers/0502/0502009.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Industrial Organization with number 0502009.

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Length: 28 pages
Date of creation: 09 Feb 2005
Date of revision:
Handle: RePEc:wpa:wuwpio:0502009

Note: Type of Document - pdf; pages: 28
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Web page: http://128.118.178.162

Related research

Keywords: Price Indexes; durable goods demand; consumer heterogeneity;

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References

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  1. Ernst R. Berndt & Zvi Griliches, 1993. "Price Indexes for Microcomputers: An Exploratory Study," NBER Chapters, in: Price Measurements and Their Uses, pages 63-100 National Bureau of Economic Research, Inc.
  2. Ana Aizcorbe & Samuel Kortum, 2004. "Moore's Law and the Semiconductor Industry: A Vintage Model," Industrial Organization 0412008, EconWPA.
  3. Jaison R. Abel & Ernst R. Berndt & Alan G. White, 2003. "Price Indexes for Microsoft's Personal Computer Software Products," NBER Working Papers 9966, National Bureau of Economic Research, Inc.
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Cited by:
  1. Marc Rysman & Gautam Gowrisankaran, 2011. "Dynamics of Consumer Demand for New Durable Goods," Boston University - Department of Economics - Working Papers Series WP2011-062, Boston University - Department of Economics.

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