IDEAS home Printed from https://ideas.repec.org/a/ucp/jpolec/v110y2002i4p705-729.html
   My bibliography  Save this article

Quantifying the Benefits of New Products: The Case of the Minivan

Author

Listed:
  • Amil Petrin

Abstract

This paper proposes a technique for obtaining more precise estimates of demand and supply curves when one is constrained to market-level data. The technique allows one to augment market share data with information relating consumer demographics to the characteristics of the products they purchase. This extra information plays the same role as consumer-level data, allowing estimated substitution patterns and (thus) welfare to directly reflect demographic-driven differences in tastes for observed characteristics. I apply the technique to the automobile market, estimating the economic effects of the introduction of the minivan. I show that models estimated without micro data yield much larger welfare numbers than the model using them, primarily because the micro data appear to free the model from a heavy dependence on the idiosyncratic logit "taste" error. I complete the welfare picture by measuring the extent of first-mover advantage and profit cannibalization both initially by the innovator and later by the imitators. My results support a story in which large improvements in consumers' standard of living arise from competition as firms cannibalize each other's profits by seeking new goods that give them some temporary market power.

Suggested Citation

  • 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.
  • Handle: RePEc:ucp:jpolec:v:110:y:2002:i:4:p:705-729
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/340779
    File Function: main text
    Download Restriction: Access to the online full text or PDF requires a subscription.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
    Full references (including those not matched with items on IDEAS)

    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:ucp:jpolec:v:110:y:2002:i:4:p:705-729. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division). General contact details of provider: http://www.journals.uchicago.edu/JPE/ .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.