Dynamics of Consumer Demand for New Durable Goods

Gautam Gowrisankaran and Marc Rysman

No 14737, NBER Working Papers from National Bureau of Economic Research, Inc

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 one-year elasticity in response to a transitory industry-wide price shock is about 25% less than the one-month elasticity. Standard cost-of-living indices overstate welfare gain in later periods due to a changing composition of buyers.

JEL-codes: C23 E31 L1 L13 L68 (search for similar items in EconPapers)
Date: 2009-02
New Economics Papers: this item is included in nep-mac, nep-mic and nep-mkt
Note: IO PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Published as "Dynamics of Consumer Demand for New Durable Goods," (with Marc Rysman) (Journal of Political Economy 120, 1173-1219, 2012)

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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 (2007)
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