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The Growth of Network Computing: Quality-Adjusted Price Changes for Network Servers

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  • John Van Reenen

Abstract

This article investigates the evolution of quality-adjusted prices for servers motivated by two facts. First, the recent productivity acceleration in the US is closely linked to the spread of IT of which networked computing is a large component. Second, the growth of network computing itself has been fostered by the rapid growth in the quality and quantity of server hardware and software. The preferred hedonic price index fell much more rapidly than the standard 'matched model' price index, mainly due to the selection bias in the standard model arising from the exit of obsolete models, which would have had the fastest price falls. Copyright 2006 Royal Economic Society.

Suggested Citation

  • John Van Reenen, 2006. "The Growth of Network Computing: Quality-Adjusted Price Changes for Network Servers," Economic Journal, Royal Economic Society, vol. 116(509), pages 29-44, February.
  • Handle: RePEc:ecj:econjl:v:116:y:2006:i:509:p:f29-f44
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    References listed on IDEAS

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    1. Knetter, Michael M, 1989. "Price Discrimination by U.S. and German Exporters," American Economic Review, American Economic Association, vol. 79(1), pages 198-210, March.
    2. Ernst R. Berndt & Neal J. Rappaport, 2001. "Price and Quality of Desktop and Mobile Personal Computers: A Quarter-Century Historical Overview," American Economic Review, American Economic Association, vol. 91(2), pages 268-273, May.
    3. Gerard J. Berg, 2006. "Revolutionary Effects of New Information Technologies," Economic Journal, Royal Economic Society, vol. 116(509), pages 10-28, February.
    4. Jerome Foncel & Marc Ivaldi, 2005. "Operating System Prices In The Home Pc Market," Journal of Industrial Economics, Wiley Blackwell, vol. 53(2), pages 265-297, June.
    5. 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.
    6. 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..
    7. Ernst R. Berndt & Zvi Griliches & Neal Rappaport, 1993. "Econometric Estimates of Prices Indexes for Personal Computers in the 1990s," NBER Working Papers 4549, National Bureau of Economic Research, Inc.
    8. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," American Economic Review, American Economic Association, vol. 91(1), pages 1-32, March.
    9. Jerry A. Hausman & David A. Wise, 1985. "Social Experimentation," NBER Books, National Bureau of Economic Research, Inc, number haus85-1.
    10. repec:bin:bpeajo:v:27:y:1996:i:1996-3:p:1-83 is not listed on IDEAS
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    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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