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From Superminis to Supercomputers: Estimating Surplus in the Computing Market

In: The Economics of New Goods

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  • Shane M. Greenstein

Abstract

Innovation was rampant in the computer industry during the late 1960s and the 1970s. Did innovation vastly extend the capabilities of computers or simply reduce the costs of doing the same thing? This question goes to the heart of whether the rate of decline in 'constant-quality' computing prices incorrectly identifies the sources of improvement and benefits from technological change. This paper argues that innovation freed computers of technical constraints to providing new services, manifesting many new capabilities in systems with larger capacity. Both anecdotal and quantitative evidence suggest that many buyers adopted new systems to get access to these new capabilities, not solely to take advantage of lower prices. The analysis divides itself into several related questions. First, what innovations in this period are associated with extensions of capabilities? Second, do buyers adopt products that embody extensions of capabilities? Third, how does a measurement framework represent that action? Are extensions embodied only in increases in capacity or are they embodied in other measurable features of a computer system as well?
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Suggested Citation

  • Shane M. Greenstein, 1996. "From Superminis to Supercomputers: Estimating Surplus in the Computing Market," NBER Chapters,in: The Economics of New Goods, pages 329-372 National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:6071
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    References listed on IDEAS

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    1. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, pages 242-262.
    2. Bresnahan, Timothy F, 1986. "Measuring the Spillovers from Technical Advance: Mainframe Computers inFinancial Services," American Economic Review, American Economic Association, pages 742-755.
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    Citations

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    Cited by:

    1. Matthew Gentzkow, 2007. "Valuing New Goods in a Model with Complementarity: Online Newspapers," American Economic Review, American Economic Association, pages 713-744.
    2. Jürgen Bitzer, 1997. "The Computer Industry in East and West: Do Eastern European Countries Need a Specific Science and Technology Policy?," Discussion Papers of DIW Berlin 148, DIW Berlin, German Institute for Economic Research.
    3. Stoneman, Paul, 2011. "Soft Innovation: Economics, Product Aesthetics, and the Creative Industries," OUP Catalogue, Oxford University Press, number 9780199697021.
    4. Mitsuru Sunada, 2005. "Welfare effects of quality change and new products in the Japanese mobile telecommunications market: 1995-2001," Economics of Innovation and New Technology, Taylor & Francis Journals, pages 715-733.
    5. Donghun Kim, 2004. "Estimation of the Effects of New Brands on Incumbents’ Profits and Consumer Welfare: The U.S. Processed Cheese Market Case," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 25(3), pages 275-293, September.
    6. Chaim Fershtman & Neil Gandal, 1998. "The Effect of the Arab Boycott on Israel: The Automobile Market," RAND Journal of Economics, The RAND Corporation, pages 193-214.
    7. Amil Petrin, 2001. "Quantifying the Benefits of New Products: The Case of the Minivan," NBER Working Papers 8227, National Bureau of Economic Research, Inc.
    8. Roberto Fontana, 2003. "Technological disequilibrium: measuring technical change in fast growing industries: the case of local area network equipement," KITeS Working Papers 145, KITeS, Centre for Knowledge, Internationalization and Technology Studies, Universita' Bocconi, Milano, Italy, revised Jul 2003.
    9. Van Reenen, John, 2004. "Is there a market for work group servers? Evaluating market level demand elasticities using micro and macro models," LSE Research Online Documents on Economics 773, London School of Economics and Political Science, LSE Library.
    10. Matthew Gentzkow, 2006. "Valuing New Goods in a Model with Complementarities: Online Newspapers," NBER Working Papers 12562, National Bureau of Economic Research, Inc.
    11. Kim, Donghun, 2004. "Estimation of the Effects of New Brands on Incumbents' Profits and Consumer Welfare: The U.S. Processed Cheese Market Case," Research Reports 25192, University of Connecticut, Food Marketing Policy Center.

    More about this item

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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