Dynamics of Consumer Demand for New Durable Goods

48 Pages Posted: 21 Feb 2009 Last revised: 24 Feb 2009

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: February 2009

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.

Suggested Citation

Gowrisankaran, Gautam and Rysman, Marc, Dynamics of Consumer Demand for New Durable Goods (February 2009). NBER Working Paper No. w14737. Available at SSRN: https://ssrn.com/abstract=1347220

Gautam Gowrisankaran (Contact Author)

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

Boston University - Department of Economics ( email )

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

Register to save articles to
your library

Register

Paper statistics

Downloads
100
rank
64,509
Abstract Views
1,433
PlumX Metrics
!

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information