Product Innovations and Quality-Adjusted Prices

9 Pages Posted: 23 Oct 2002

See all articles by Arthur Fishman

Arthur Fishman

Bar-Ilan University - Department of Economics

Rafael Rob

University of Pennsylvania - Department of Economics

Date Written: May 7, 2002

Abstract

A striking characteristic of high-tech products is the rapid decrease of their quality-adjusted prices. Empirical studies show that the rate of decrease of QAPs is typically not constant over time; QAPs decrease rapidly at early stages of the product and then the rate of decrease tapers off. Studies also suggest that the QAP is positively correlated with the rate of product introductions: The faster new products are introduced, the faster is the rate of decrease in their QAPs. This paper presents a dynamic model of product innovations consistent with these empirical regularities.

Keywords: Quality Adjusted Prices, Frequency of Innovations, Durable Goods, Obsolescence

JEL Classification: C73, L12, L63, O31

Suggested Citation

Fishman, Arthur and Rob, Rafael, Product Innovations and Quality-Adjusted Prices (May 7, 2002). PIER Working Paper No. O2-032, Available at SSRN: https://ssrn.com/abstract=335181 or http://dx.doi.org/10.2139/ssrn.335181

Arthur Fishman

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
972-3-531-8366 (Phone)
972 3 535 3180 (Fax)

Rafael Rob (Contact Author)

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States
215-898-6775 (Phone)
215-573-2057 (Fax)

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