The Effects of Product Ageing on Demand: The Case of Digital Cameras
The static differentiated product demand model when applied to products with rapid product turnover and declining prices, yields implausible results. One response is to explicitly model the inter-temporal choices of consumers but computational demands require restrictive assumptions on consumer heterogeneity and limits on the characteristics included in the model. We propose, instead, to supplement the static model with a control for the age that each product has been in the market. This approach is applied to the US digital camera market and we find we obtain more plausible estimates. Our results are consistent with inter- temporal price discrimination by firms. Furthermore, our results suggest that ignoring the effects of product ageing may result in substantially overestimated price elasticities and technological progress and underestimated price-cost mark-ups.
|Date of creation:||Nov 2008|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.latrobe.edu.au/economics|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gautam Gowrisankaran & Marc Rysman, 2007.
"Dynamics of Consumer Demand for New Durable Goods,"
Boston University - Department of Economics - Working Papers Series
WP2007-024, Boston University - Department of Economics.
- Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
- Tülin Erdem & Michael Keane & T. Öncü & Judi Strebel, 2005. "Learning About Computers: An Analysis of Information Search and Technology Choice," Quantitative Marketing and Economics, Springer, vol. 3(3), pages 207-247, September.
- Martin Shubik, 2008.
"Innovation and Equilibrium?,"
Cowles Foundation Discussion Papers
1674, Cowles Foundation for Research in Economics, Yale University.
- Daniel A. Ackerberg & Marc Rysman, 2002.
"Unobserved Product Differentiation in Discrete Choice Models: Estimating Price Elasticities and Welfare Effects,"
NBER Working Papers
8798, National Bureau of Economic Research, Inc.
- Daniel A. Ackerberg & Marc Rysman, 2005. "Unobserved Product Differentiation in Discrete-Choice Models: Estimating Price Elasticities and Welfare Effects," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 771-788, Winter.
- Steven Berry & James Levinsohn & Ariel Pakes, 1995.
"Voluntary Export Restraints on Automobiles: Evaluating a Strategic TradePolicy,"
NBER Working Papers
5235, National Bureau of Economic Research, Inc.
- Berry, S. & Linsohn, J. & Pakes, A., 1997. "Voluntary Export Restraints on Automobiles: Evaluating a Strategic Trade Policy," Working Papers 393, Research Seminar in International Economics, University of Michigan.
- Junji Xiao, 2008. "Technological advances in digital cameras: Welfare analysis on easy-to-use characteristics," Marketing Letters, Springer, vol. 19(2), pages 171-181, June.
- Ackerberg, Daniel & Lanier Benkard, C. & Berry, Steven & Pakes, Ariel, 2007. "Econometric Tools for Analyzing Market Outcomes," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 63 Elsevier.
- Daniel A. Ackerberg, 2003. "Advertising, learning, and consumer choice in experience good markets: an empirical examination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1007-1040, 08.
- 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.
- Christopher R. Knittel & Konstantinos Metaxoglou, 2008. "Estimation of Random Coefficient Demand Models: Challenges, Difficulties and Warnings," NBER Working Papers 14080, National Bureau of Economic Research, Inc.
- Carranza, Juan Esteban, 2010.
"Product innovation and adoption in market equilibrium: The case of digital cameras,"
International Journal of Industrial Organization,
Elsevier, vol. 28(6), pages 604-618, November.
- Juan Esteban Carranza, 2010. "Product Innovation and Adoption in Market Equilibrium: The Case of Digital Cameras," BORRADORES DE ECONOMÍA Y FINANZAS 007127, UNIVERSIDAD ICESI.
- Chen, Jiawei & Esteban, Susanna & Shum, Matthew, 2008. "Demand and supply estimation biases due to omission of durability," Journal of Econometrics, Elsevier, vol. 147(2), pages 247-257, December.
- Igal Hendel & Aviv Nevo, 2006.
"Measuring the Implications of Sales and Consumer Inventory Behavior,"
Econometric Society, vol. 74(6), pages 1637-1673, November.
- Igal Hendel & Aviv Nevo, 2005. "Measuring the Implications of Sales and Consumer Inventory Behavior," NBER Working Papers 11307, National Bureau of Economic Research, Inc.
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- repec:cdl:compol:217 is not listed on IDEAS
- Aviv Nevo, 2000. "Mergers with Differentiated Products: The Case of the Ready-to-Eat Cereal Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 395-421, Autumn.
- Aviv Nevo, 2000. "A Practitioner's Guide to Estimation of Random-Coefficients Logit Models of Demand," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 513-548, December.
When requesting a correction, please mention this item's handle: RePEc:trb:wpaper:2008.06. 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: (Stephen Scoglio)The email address of this maintainer does not seem to be valid anymore. Please ask Stephen Scoglio to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.