Abstract

http://ssrn.com/abstract=1624251
 
 

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Product Innovation and Adoption in Market Equilibrium: The Case of Digital Cameras


Juan Esteban Carranza


Universidad Icesi - Economics & Management

March 1, 2009

Universidad Icesi Department of Economics Research Paper No. 18

Abstract:     
This paper contains an empirical dynamic model of supply and demand in the market for digital cameras with endogenous product innovation. On the demand side, heterogeneous consumers time optimally the purchase of goods depending on the expected evolution of prices and characteristics of available cameras. On the supply side, firms introduce new camera models accounting for the dynamic value of new products and the optimal behavior of consumers. The model is estimated using data from the market for digital cameras and the estimated model replicates rich dynamic features of the data. The estimated model is used to perform counterfactual computations, which suggest that more competition or lower product introduction costs generate more product variety but lower average product quality.

Number of Pages in PDF File: 50

Keywords: Durable goods, Dynamic demand, Innovation

JEL Classification: C30, D10, L10

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Date posted: June 15, 2010 ; Last revised: June 23, 2010

Suggested Citation

Carranza, Juan Esteban, Product Innovation and Adoption in Market Equilibrium: The Case of Digital Cameras (March 1, 2009). Universidad Icesi Department of Economics Research Paper No. 18. Available at SSRN: http://ssrn.com/abstract=1624251 or http://dx.doi.org/10.2139/ssrn.1624251

Contact Information

Juan E. Carranza (Contact Author)
Universidad Icesi - Economics & Management ( email )
Cali
Colombia

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