Dynamics of Consumer Demand for New Durable Goods

33 Pages Posted: 13 Jul 2007

See all articles by Gautam Gowrisankaran

Gautam Gowrisankaran

University of Arizona - Eller College of Management; National Bureau of Economic Research (NBER)

Marc Rysman

Boston University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: April 2007

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.

Keywords: dynamic demand, discete choice, camcorders, consumer electronics

JEL Classification: L63, C13, C51, D12, D90, L15

Suggested Citation

Gowrisankaran, Gautam and Rysman, Marc, Dynamics of Consumer Demand for New Durable Goods (April 2007). Available at SSRN: https://ssrn.com/abstract=1000222 or http://dx.doi.org/10.2139/ssrn.1000222

Gautam Gowrisankaran

University of Arizona - Eller College of Management ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States

HOME PAGE: http://econ.arizona.edu/faculty/gowrisankaran.asp

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Marc Rysman (Contact Author)

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-3086 (Phone)
617-353-4449 (Fax)

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