Dynamics of Consumer Demand for New Durable Goods

Gautam Gowrisankaran and Marc Rysman

Journal of Political Economy, 2012, vol. 120, issue 6, 1173 - 1219

Abstract: Most new consumer durable goods experience rapid prices declines and quality improvements, suggesting the importance of modeling dynamics. This paper specifies a dynamic model of consumer preferences for new durable goods with persistently heterogeneous consumer tastes, rational expectations, and repeat purchases over time. We estimate the model on the digital camcorder industry using panel data on prices, sales, and characteristics. We find that the 1-year elasticity in response to a transitory industrywide price shock is about 25 percent less than the 1-month elasticity. Standard cost-of-living indices overstate welfare gain in later periods due to a changing composition of buyers.

Date: 2012
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Citations: View citations in EconPapers (150)

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Related works:
Working Paper: Dynamics of Consumer Demand for New Durable Goods (2011)
Working Paper: Dynamics of Consumer Demand for New Durable Goods (2009)
Working Paper: Dynamics of Consumer Demand for New Durable Goods (2007)
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