Estimating the Benefits of New Products

Walter Diewert and Robert Feenstra

No 25991, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A major challenge facing statistical agencies is the problem of adjusting price and quantity indexes for changes in the availability of commodities. This problem arises in the scanner data context as products in a commodity stratum appear and disappear in retail outlets. Hicks suggested a reservation price methodology for dealing with this problem in the context of the economic approach to index number theory. Hausman used a linear approximation to the demand curve to compute the reservation price, while Feenstra used a reservation price of infinity for a CES demand curve, which will lead to higher gains. The present paper evaluates these approaches, comparing the CES gains to those obtained using a quadratic utility function using scanner data on frozen juice products. We find that the CES gains from new frozen juice products are about five times greater than those obtained using the quadratic utility function.

JEL-codes: C43 C81 D11 (search for similar items in EconPapers)
Date: 2019-06
New Economics Papers: this item is included in nep-upt
Note: ITI PR
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Citations: View citations in EconPapers (11)

Published as Estimating the Benefits of New Products , W. Erwin Diewert, Robert C. Feenstra. in Big Data for Twenty-First-Century Economic Statistics , Abraham, Jarmin, Moyer, and Shapiro. 2022

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Related works:
Chapter: Estimating the Benefits of New Products (2021)
Working Paper: Estimating the Benefits of New Products (2018)
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