Dynamics of Consumer Demand for New Durable Goods

Gautam Gowrisankaran and Marc Rysman
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Gautam Gowrisankaran: Washington University in St. Louis and NBER

No WP2007-024, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics

Abstract: This paper specifies and estimates a dynamic model of consumer preferences for new durable goods with persistent heterogeneous consumer tastes, rational expectations about future products and repeat purchases over time. Most new consumer durable goods, particularly consumer electronics, are characterized by relatively high initial prices followed by rapid declines in prices and improvements in quality. The evolving nature of product attributes suggests the importance of modeling dynamics in estimating consumer preferences. We estimate the model on the digital camcorder industry using a panel data set on prices, sales and characteristics. We find that dynamics are a very important determinant of consumer preferences and that estimated coefficients are more plausible than with traditional static models. We use the estimates to investigate the value of new consumer goods and intertemporal elasticities of demand.

Pages: 57pages
Date: 2007-04
New Economics Papers: this item is included in nep-mic
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Related works:
Journal Article: Dynamics of Consumer Demand for New Durable Goods (2012)
Working Paper: Dynamics of Consumer Demand for New Durable Goods (2011)
Working Paper: Dynamics of Consumer Demand for New Durable Goods (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bos:wpaper:wp2007-024

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