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Price Deflators for High Technology Goods and the New Buyer Problem

Author

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  • Ana Aizcorbe

    (Bureau of Economic Analysis)

Abstract

Some items in a household’s market basket, notably durable goods, are purchased only occasionally. In contrast, standard price measures implicitly assume that consumers purchase some amount of every available good in every period. The occasional purchase of an existing good by a new buyer generates a “new buyer” problem that is similar to the traditional “new goods” problem generated by the entry of new goods. This paper uses an idea introduced by Fisher and Griliches (1995) and Griliches and Cockburn (1995) to develop price indexes for goods that are not purchased in each period. A comparison of the resulting price indexes with those calculated under the standard assumption suggests that the sharp declines typically exhibited by price indexes for many high technology goods may be overstated. However, it is impossible to make any definitive statements about the numerical magnitude of this potential problem. These preliminary findings simply underscore the importance of further research to study this problem for high tech goods and to explore the possibility that similar problems may arise for other durable goods.

Suggested Citation

  • Ana Aizcorbe, 2005. "Price Deflators for High Technology Goods and the New Buyer Problem," Industrial Organization 0502009, EconWPA.
  • Handle: RePEc:wpa:wuwpio:0502009
    Note: Type of Document - pdf; pages: 28
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    File URL: http://econwpa.repec.org/eps/io/papers/0502/0502009.pdf
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    References listed on IDEAS

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    1. Ernst R. Berndt & Zvi Griliches, 1993. "Price Indexes for Microcomputers: An Exploratory Study," NBER Chapters,in: Price Measurements and Their Uses, pages 63-100 National Bureau of Economic Research, Inc.
    2. Jaison R. Abel & Ernst R. Berndt & Alan G. White, 2003. "Price Indexes for Microsoft's Personal Computer Software Products," NBER Working Papers 9966, National Bureau of Economic Research, Inc.
    3. Ana Aizcorbe & Samuel Kortum, 2005. "Moore's Law and the Semiconductor Industry: A Vintage Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(4), pages 603-630, December.
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    Cited by:

    1. Gautam Gowrisankaran & Marc Rysman, 2012. "Dynamics of Consumer Demand for New Durable Goods," Journal of Political Economy, University of Chicago Press, vol. 120(6), pages 1173-1219.

    More about this item

    Keywords

    Price Indexes; durable goods demand; consumer heterogeneity;

    JEL classification:

    • L - Industrial Organization

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