Learning by Doing and the Demand for Advanced Products
55 Pages Posted: 9 Nov 2018
Date Written: March 12, 2018
How much does consumer learning by doing affect the demand for advanced products? In the context of digital cameras, I use detailed picture-level data to directly measure changes in picture quality as a result of learning by doing or product switching. While learning by doing builds up consumer human capital, a fraction of this human capital is product-specific, creating consumer switching costs. To quantify the role of consumer human capital, I structurally estimate the demand for digital cameras with consumer learning by doing. The evolution of consumer human capital explains 23% of the sales of advanced digital cameras, whereas brand-specific human capital –arising from incompatibility in product design – explains 15% of consumer brand-choice inertia.
Keywords: Consumer Human Capital, Learning by Doing, Switching Costs, Product Diffusion, Dynamic Programming
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