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Estimating Future Consumer Welfare Gains from Innovation: The Case of Digital Data Storage

  • Austin, David
  • Macauley, Molly


    (Resources for the Future)

We develop a quality-adjusted cost index to estimate expected returns to investments in new technologies. The index addresses the problem of measuring social benefits from innovations in service sector inputs, where real output is not directly observable. We forecast welfare gains from two U.S. Advanced Technology Program innovations equaling 25%-50% of expected price, and aggregate consumer benefits of $1-$2 billion, relative to trends in existing technologies. Our model’s probabilistic parameters reflect uncertainty about prospective outcomes and in our hedonic estimates of shadow values for selected product attributes. The index can be readily adopted by research and development (R&D) managers in industry and government.

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Paper provided by Resources For the Future in its series Discussion Papers with number dp-00-13.

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Date of creation: 01 Mar 2000
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Handle: RePEc:rff:dpaper:dp-00-13
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