measuring the spillovers from technical advance mainframe computers in financial services measuring the social gains from recent technological advances is difficult because there are no output indexes from some important adopters measurement methods that infer the willingness to pay of theadopting industries from the derived demand curve for a new technologyovercome this difficulty the derived demand for high speed computersfor use in banks finance and insurance is shown to imply a very largesocial gain to computerization that is not captured by computer manufacturers copyright 1986 by american economic association

observable and unobservable determinants of replacement of home appliances despite the dominant role of replacement purchases in many consumer durable categories the research in this area has not been extensive only in the last few years has the economic theory made progress towards a more rigorous analysis of the dynamic nature involved in replacement decisions as a consequence of this applied researchers have switched from conventional discrete choice models to new econometric techniques e g duration analysis that allow for richer relationships between socioeconomic variables characteristics of the durable good and the likelihood of its replacement over time our study focuses on two home appliances taken from the residential energy consumption survey recs based on a duration model that allows for unobserved heterogeneity across households we conclude that household demographics and product features both observable and unobservable in general have statistical power to explain replacement decisions over time

what u s data should be used to measure the price elasticity of demand for alcohol this paper examines how estimates of the price elasticity of demand for beer vary with the choice of alcohol price series examined our most important finding is that the commonly used accra price data are unlikely to reliably indicate alcohol demand elasticities estimates obtained from this source vary drastically and unpredictably as an alternative researchers often use beer taxes to proxy for alcohol prices while the estimated beer taxes elasticities are more stable there are several problems with using taxes including difficulties in accounting for cross price effects we believe that the most useful estimates reported in this paper are obtained using annual uniform product code upc barcode scanner data on grocery store alcohol prices these estimates suggest relatively low demand elasticity probably around 0 3 with evidence that the elasticities are considerably overstated in models that control for beer but not wine or spirits prices

decisions to replace consumer durables goods an econometric application of wiener and renewal processes current sales of most consumer durable goods are accounted for by replacements however only in recent years has the economic literature provided a more rigorous analysis of replacement purchases by incorporating elements of dynamic programming and of the theory of stochastic processes this paper is an empirical study of household replacement decisions modeled as an optimal stopping rule using data from the residential energy consumption survey recs of the u s department of energy we conclude that demographic variables operation and replacement costs and equipment characteristics may affect ownership spells of appliances such as electric heaters and central air conditioners

estimating griliches k shifts griliches k shift a crucial parameter in the welfare evaluation of technological change is shown to be equal to the radial rate of technological change plus a vector of commodity bias parameters obtained from the distance function the analysis permits decomposition of sectoral productivity growth into productivity growth by commodity the k shifts estimated for wheat corn soybeans and beef in u s agriculture indicate a decrease in the marginal cost of production of corn soybeans and wheat during the 1950 1993 years

minimum unit prices for alcohol minimum unit prices mups have been proposed on the grounds that they can reduce alcohol consumption of the heaviest drinkers without significantly burdening moderate drinkers this paper examines the case for mups in an optimal tax framework such a policy can improve welfare when two conditions are both satisfied first beverage quality and quantity should be substitutes second there should be more distortion to consumption of cheaper alcohol than to more expensive varieties the consequences of a mup for the optimal corrective tax are explored with a calibrated numerical example this example illustrates how the optimal tax rate might be higher when used in isolation than when a mup is also being used

grouping durable goods modelling consumer preferences has a long history of interest in the literature several approaches that have been proposed consider consumer behaviour to be hierarchical products are divided into groups and preferences within a group are modelled independently an important question that arises in these efforts concerns the development of appropriate higher level groups this paper replicates and extends an earlier study by pickering et al 1973 in which product groups were developed based on consumer perceptions of product attributes we collect survey data perceived product attributes and similarity ratings for a set of durable products multiple measures are thus used to test the stability and consistency of product groups a matrix of product similarity values is constructed for each of these two survey based measures cluster analysis is then performed to develop a grouping scheme for these durable goods althought differences are observed the product composition of the resulting product groups a

stationary equilibrium in a market for durable assets this paper presents a dynamic model of consumer trading on the primary secondary and scrap markets for a stochastically deteriorating durable good in a stationary economy with perfect information and no transaction costs we explicitly model the trading process by tracking each durable from its birth in the primary market through its sequence of owners in the secondary market until its death in the scrap market we prove that a stationary equilibrium exists characterize the distribution of consumer holdings of durables and show that equilibrium asset prices are shadow prices to a particular regenerative optimal stopping problem we show that each heterogeneous agent equilibrium is observationally equivalent to a homogeneous agent equilibrium we derive a differential equation for equilibrium rental rates and a functional equation which links rental rates to asset prices these equations show precisely how the structure of durable prices and rental rates embody the functional form and population distribution of preferences and the technological characteristics of durable goods this abstract was borrowed from another version of this item

heuristics and biases in timing the replacement of durable products the process by which individuals make recurrent decisions about when to replace durable goods is examined two experiments are reported in which subjects play the role of purchasing agents who must repeatedly decide whether to keep a currently owned manufacturing device or replace it with a superior new one given uncertainty about the future performance of new and currently owned machines replacement patterns are compared with those that would be predicted if subjects made decisions as rational economic agents following the principles of optimal replacement theory this comparison reveals a number of systematic departures from optimality that do not vanish with experience among these are a tendency to replace at a slower rate than would be predicted by normative theory and a tendency to weigh opportunity costs arising from obsolescence greater than those arising from product deterioration in addition subjects display a bias against making replacement purchases given short lapses of time since the previous replacement the findings are interpreted in terms of known biases in decision making under uncertainty in dynamic and static settings

modelling the consumer s decision to replace durable goods a hazard function approach this article analysis the consumer s durable good replacement decision using hazard models in contrast to the typical limited dependent variable model often used in durable good demand studies hazard models allow for much richer replacement to illustrate the technique a recursive system consisting of a regression equation and a hazard model is used to examine home heating system replacement decisions by residencial customers of a major southeasten us electric utility the results indicate that overall system replacement rates decline over time and that the probability of replacement for specific households depends negatively on the age of the head of household abd the availability of natural gas and positively on system age and higher than expected household energy use

social networks and new product choice to successfully market new products in a social network it is essential to identify influential individuals whose product recommendations influence the consumption choices of their peers in this study we use spatial econometric methods to determine how individuals revise their preferences for product attributes when exposed to product recommendations from peers and how different individuals who vary in their degree of network connectedness exert influence on the product choices of others we find evidence that consumers look to others for guidance from peers in their preference for subjective taste specific parameters but tend not to respond to peer price choices our spatial methods allow us to empirically determine the influence exerted by individual members on the consumption choices of other members of the social network we find that connected members of the social network are not always the most influential in revising the consumption choices of others our estimates reveal that network proximity explains only 8 8 of influence

a probabilistic choice model for market segmentation and elasticity structure marketing scholars commonly characterize market structure by studying the patterns of substitution implied by brand switching though the approach is useful it typically ignores the destabilizing

a hedonic price analysis of hearing aid technology in this article we study how technological components affect the price of hearing aids the main goals are to determine which functional and technological features have the greatest influence on manufacturer based prices in the hearing aid industry and to analyse the price cost margins at the dispenser level using a unique data set that is compiled from a hearing clinic in west texas the result shows that style and signal processing scheme are the two most important determinants of hearing aid price other characteristics such as directional microphone noise cancellation and a certain shell type are also positively related to price further on average this particular local dispenser has a markup of about 35 per hearing instrument

is coal desulphurisation worthwhile evidence from the market abstract the paper develops a forward looking way to estimate the economic benefits of research and development on coal desulphurisation the methodology makes use of survey based techniques pioneered in environmental economics the empirical results illustrate the difficulty of configuring desulphurised coal to meet the requirements of existing electricity generating plants in addition to estimating the returns to investment in coal desulphurisation the contributions of the paper are in extending survey based valuation to meet the needs of r d investors for intelligence about the prospective value of their investments and using robust estimation techniques to reduce the influence of outliers

hedonic price indexes for spreadsheets and an empirical test for network externalities in this article i first estimate hedonic price equations for computer spreadsheet programs and then use the analysis to empirically test whether network externalities exist in this industry the study shows that consumers are willing to pay a significant premium for spreadsheets that are compatible with the lotus platform and for spreadsheets that offer links to external databases and a similar premium for spreadsheets that offer local area network externalities finally the quality adjusted real price of computer spreadsheets declined by approximately 15 per year from 1986 to 1991

pricing competition with inventory considerations in a hazard rate prone market of durables abstract this paper addresses bertrand type pricing competition between two firms producing partially differentiated durables over a finite planning horizon the demand for durables characterized by increasing returns of scale to a price reduction is led by the hazard rate while the effect of inventories on pricing of non durables is widely recognized the management and marketing literature typically overlooks this effect in regard to horizontally competing firms for durables in this paper we show that the pricing trajectory of durables may significantly alter when inventory dynamics are accounted for in particular the price may hike upwards before dropping gradually grow or even stay at the same level over the entire product life while it would only decline if inventories and related costs are disregarded furthermore the well known optimal pricing strategy of following the pattern of sales does not necessarily confirm even for symmetric equilibria when the competing firms have either an inventory surplus or shortage

technology invention and diffusion in residential energy consumption a stochastic frontier approach traditional large appliances absorb a large share of residential electricity consumption and represent important targets of energy policy strategies aimed at achieving energy security despite being characterized by rather mature technologies this group of appliances still offers large potential in terms of efficiency gains due to their pervasive diffusion in this paper we analyse the electricity consumption of a set of four traditional white goods in a panel of ten eu countries observed over 21 years 1990 2010 with the aim of disentangling the amount of technical efficiency from the overall energy saving the technical efficiency trend is modelled through a set of technology components representing both the invention and adoption process by the means of specific patents weighted by production and bilateral import flows which allows to overcome the rigid stochastic frontier framework in modelling the effect of technical change our results show that the derived energy demand and inefficiency trends are both related to changes in the amount of available technology embodied in energy efficient appliances the effect is significant both in its domestic and international components and suggests an active role of innovation and trade policies for achieving efficiency targets which directly impact the amount of electricity consumed by households

valuing product innovation genetically engineered varieties in us corn and soybeans we develop a discrete choice model of differentiated products for us corn and soybean seed demand to study the welfare impact of genetically engineered ge crop varieties using a unique data set spanning the period 1996 2011 we find that the welfare impact of the ge innovation is significant in the last five years of the period analyzed our preferred counterfactual indicates that total surplus due to ge traits was 5 18 billion per year with seed manufacturers appropriating 56 of this surplus the seed industry obtained more surplus from ge corn whereas farmers received more surplus from ge soybeans

estimating the effects of global patent protection in pharmaceuticals a case study of quinolones in india under the trips agreement wto members are required to enforce product patents for pharmaceuticals the debate about the merits of this requirement has been extremely contentious many low income economies claim that patent protection for pharmaceuticals will result in substantially higher prices for medicines with adverse consequences for the health and well being of their citizens on the other hand research based global pharmaceutical companies argue that prices are unlikely to rise significantly because most patented products have therapeutic substitutes in this paper we empirically investigate the basis of these claims central to the ongoing debate is the structure of demand for pharmaceuticals in poor economies where because health insurance coverage is so rare almost all medical expense are met out of pocket using a detailed product level data set from india we estimate key price and expenditure elasticities and supply side parameters for the fluoroquinolones sub segment of the systemic anti bacterials i e antibiotics segment of the indian pharmaceuticals market we then use these estimates to carry out counterfactual simulations of what prices profits and consumer welfare would have been had the fluoroquinolone molecules we study been under patent in india as they were in the u s at the time our results suggest that concerns about the potential adverse welfare effects of trips may have some basis we estimate that in the absence of any price regulation or compulsory licensing the total annual welfare losses to the indian economy from the withdrawal of the four domestic product groups in the fluoroquinolone sub segment would be on the order of u s 450 million or about 73 of the sales of the entire systemic anti bacterials segment in 2000 of this amount foregone profits of domestic producers constitute roughly 50 million or 11 the overwhelming portion of the total welfare loss therefore derives from the loss of consumer welfare in contrast the profit gains to foreign producers in the absence of any price regulation are estimated to be only around 53 million per year

the era of incremental change in the technology innovation life cycle an analysis of the automotive emission control industry abstract according to the life cycle model of technological evolution after the emergence of a dominant design technological product industries undergo an era of incremental change this era of incremental change is not well understood in the existing literature although the period is typically characterized in terms of stability and minimal innovation we find that the era of incremental change can be actually quite dynamic through our research into the period of time following the emergence of a dominant design in automotive emission control systems we find that the overall product innovation in the industry did not decline immediately following the dominant design and increased throughout the era of incremental change further we find that firms maintain their attention on the same core components that they innovated upon before the dominant design but that these components make up less of the overall proportion of total innovation throughout the era of incremental change finally we found that the concentration of innovating firms in the industry increases immediately following the dominant design and this concentration decreases over time throughout the era of incremental change findings imply a pattern of contraction and expansion in the era of incremental change that extends previous work on the technological product life cycles and helps to characterize the era of incremental change in a novel way

new products quality changes and welfare measures computed from estimated demand systems this paper examines the construction of a price index based on an estimated demand system in principle the method examined can produce a price index that takes account of the introduction of new p

the welfare analysis of product innovations with an application to computed tomography scanners the main goal of this paper is to put forward a methodology for the measurement of product innovations using a value metric that is equating the magnitude of innovations with the welfare gains they generate this research design is applied to the case of computed tomography scanners a revolutionary innovation in medical technology the econometric procedure centers on the estimation of a discrete choice model the nested multinominal logit which yields the parameters of a utility function defined over the changing quality dimensions of the innovative product the estimated flow of social gains from innovation is used to compute a social rate of return to r d to explore the interrelation between innovation and diffusion and to trace the time profile of benefits and costs the latter suggesting the possible occurrence of technological cycles

the welfare impact of medicare hmos we estimate the welfare associated with the medicare hmo program now known as medicare choice m c we find that the creation of the m c program resulted in approximately 15 6 billion in consumer surplus and 52 billion in profits from 1993 to 2000 in 2000 dollars this program most likely generated significant net social welfare however we find that consumer surplus is geographically unevenly distributed prescription drug coverage accounts for approximately 45 of the estimated consumer surplus for 2000 consumer surplus increases in the number of plans in a county and most of the increase in welfare is due to increased premium competition

an empirical analysis of alcohol addiction results from the monitoring the future panels in a panel of young adults we find that alcohol consumption is addictive in the sense that increases in past or future consumption cause current consumption to rise the positive and significant future consumption effect is consistent with the hypothesis of rational addiction the long run price elasticity is approximately 60 larger than the short run price elasticity and twice as large as the elasticity that ignores addiction thus a tax hike policy to curtail consumption or abuse may not have a favorable cost benefit ratio unless it is based on the long run price elasticity jel 110

residential bioenergy heating a study of consumer perceptions of improved woodstoves abstract consumers choices play a key role for the development of biomass heating in the residential sector the city of oslo has granted subsidies to households who change to new improved low emission woodstoves the purpose of this study is to expand the knowledge about users experiences and attitudes to residential biomass heating an adapted model of the theory of planned behavior was used to model households inclination to continue using their woodstoves for heating more than 800 questionnaires were collected from households that recently had invested in an improved woodstove the respondents were satisfied with the new woodstoves the respondents also considered themselves competent to use and maintain the stove and few had problems acquiring fuelwood further analyses showed that the intention to continue to use the new woodstove depends on economic benefits heating performance perceived time and effort to operate the stove environmental effects of heating as well as perceived subjective norm the results imply that when marketing a modern technology for bioenergy heating both public authorities and producers should consider issues related to the users perception of subjective norm such as perceived status of using bioenergy or environmental concerns when designing campaigns to promote the use of woodstoves

indirect network externality effects on product attributes indirect network externality ine effect exists when the utility of a product increases with the greater availability of compatible complementary products we demonstrate that ine effects can vary by product attributes with externality sensitive attributes gaining more from increased availability of complementary products than other attributes past research has assumed that the benefit of increased availability of complementary products e g software accrues to theentireproduct e g hardware utilizing data covering a period from 1985 to 1995 on compact disc player prices attributes and cd titles releases and using a hedonic price approach we find significant positive interactions between cd title availability and two attributes of the cd player namely changer capacity and its oversampling rate in addition to ine attribute interactions increased availability of cd titles is found to have a significant positive impact on the overall price of cd players which is consistent with past research collectively these effects of ine have helped reduce the yearly decline in the price of cd players the finding that ine effects differentially affect different attributes can help managers in decisions such as pricing timing of introduction and changing the levels of ine sensitive attributes

is public r d a complement or substitute for private r d a review of the econometric evidence is public r d spending complementary and thus additional to private r d spending or does it substitute for and tend to crowd out private r d conflicting answers are given to this question we survey the body of available econometric evidence accumulated over the past 35 years a framework for analysis of the problem is developed to help organize and summarize the findings of econometric studies based on time series and cross section data from various levels of aggregation laboratory firm industry country the findings overall are ambivalent and the existing literature as a whole is subject to the criticism that the nature of the experiment s that the investigators envisage is not adequately specified we conclude by offering suggestions for improving future empirical research on this issue

implicit taxes collected by state liquor monopolies state monopolization or taxation aresupposedly justified because of negativeexternalities from alcohol consumption butrecent research questions the efficacy ofsuch policies suggesting that their actualgoals may be revenue generation consideration of this hypothesis isfacilitated by estimates of the implicittaxes charged in monopoly states whichgenerally are substantially higher thantaxes in non monopoly states evidencethat monopolization and high taxes do notaffect the level of externalities is alsoexplained by adjustments that rationalindividuals make to avoid the consequencesof such policies thus providing furthersupport for the revenue maximizationhypothesis

upstream innovation and product variety in the u s home pc market this article investigates the welfare implications of the rapid innovation in central processing units cpus and asks whether it results in inefficient elimination of basic personal computer pc products i analyse a game in which firms make multiple discrete product choices and tackle challenges such as partial identification and sample selection estimation results demonstrate that the demand for pcs is highly segmented and that fixed costs consume a substantial portion of the per unit producer profit the estimated model implies that intel s introduction of its pentium m chip contributed significantly to the growth of the mobile pc segment and to consumer welfare the lion s share of the benefits to consumers was enjoyed by the 20 least price sensitive consumers i also find that the pentium m crowded out the pentium iii and pentium 4 technologies and that the benefits to consumers from keeping those older products on the shelf would have been comparable to the added fixed costs while total welfare cannot be increased by keeping older technologies on the shelf such a policy would have allowed the benefits from innovation to trickle down to price sensitive households improving their access to mobile computing

applied welfare economics with discrete choice models economists have been paying increasing attention to the study of situations in which consumers face a discrete rather than a continuous set of choices such models are potentially very important in evaluating the impact of government programs upon consumer welfare but very little has been said in general regarding the tools of applied welfare economics indiscrete choice situations this paper shows how the conventional methods of applied welfare economics can be modified to handle such cases it focuses on the computation of the excess burden of taxation and the evaluation of quality change the results are applied to stochastic utility models including the popular cases of probit and logit analysis throughout the emphasis is on providing rigorous guidelines for carrying out applied work this abstract was borrowed from another version of this item

much ado about two reconsidering retransformation and the two part model in health econometrics in health economics applications involving outcomes y and covariates x it is often the case that the central inferential problems of interest involve e y x and its associated partial effects or elasticities many such outcomes have two fundamental statistical properties y 0 and the outcome y 0 is observed with sufficient frequency that the zeros cannot be ignored econometrically this paper 1 describes circumstances where the standard two part model with homoskedastic retransformation will fail to provide consistent inferences about important policy parameters and 2 demonstrates some alternative approaches that are likely to prove helpful in applications

new estimates of the optimal tax on alcohol in this paper i use a new data set to estimate the optimal alcohol tax rate as a benchmark the empirical results imply that the optimal tax rate is over 100 percent of the net of tax price however alcohol taxation is a second best solution to the problems associated with alcohol abuse i conclude that the optimal alcohol tax rate would be much lower if punishment for drunk driving were more certain and severe government provision of information about the health consequences of heavy drinking would also remove part of the efficiency rationale for alcohol taxes

valuation of patented product features ultimately patents have value to the extent to which the product features enabled by the patents have economic value in the marketplace products that are enhanced by inclusion of patented features should generate incremental profits incremental profits can be assessed by considering demand for products with patented features and contrasting that demand with demand for the same product without the patented features profit calculations must be based on valid estimates of demand as well as assumptions about how competitive forces affect demand via computation of market equilibria a conjoint survey can be used to estimate demand recently conjoint methods have been applied in the patent setting but the measures of value used are purely demand based and do not involve equilibrium profit calculations we illustrate our method using the market for digital cameras and show that current methods can overstate the value of a patent

cost pass through in differentiated product markets the case of u s processed cheese in this paper we estimate a mixed logit model for demand in the u s processed cheese market the estimates are used to determine pass through rates of cost changes under different behavioral regimes we find that under collusion the pass through rates for all brands fall between 21 and 31 while under nash bertrand price competition the range of pass through rates is between 73 and 103 the mixed logit model provides a more flexible framework for studying pass through rates than the logit model since the curvature of the demand functions depends upon the empirical distribution of consumer types

demand for differentiated durable products the case of the u s computer printer market i introduction this paper aims to provide a theoretical and empirical description of consumer behavior in a dynamic market for differentiated durable goods the computer hardware industry serves as an example of the type of market we consider markets for computer systems and components as well as for many other high technology products exhibit some striking similarities that are of particular concern for an empirical economist as follows products are differentiated in multiple dimensions in addition to price products are durable yielding consumption services over multiple periods product quality rapidly improves over time empirical work on estimating differentiated product demand systems has been dominated by static discrete choice models with random utility see berry levinsohn and pakes 1995 goldberg 1995 and nevo 2001 among others however markets for durable goods exhibit several features at odds with their assumption of myopic consumer behavior first traditional static discrete choice models implicitly assume that consumers participate in the market every period choosing one of the available products or an outside option thus the fraction of consumers who do not buy any product in a given period could only be explained by the high value they assign to the outside alternative for durable goods however purchases are made infrequently and result in a consumer s exiting the market for a significant period of time hence the model needs to account for consumers outflow from the market arising from their purchase decisions second a static framework may give a misleading picture of the aggregate sales time pattern in a dynamic industry in many markets for durable products it is not uncommon to see rapidly improving product quality and falling prices given any reasonable set of consumer preferences over the product characteristics space static discrete choice models for such an industry will tend to predict an upward trend in aggregate sales this fails to account for a variety of patterns commonly seen in the data third the evolution of product quality leads to the possibility of intertemporal demand substitution by forgoing a current purchase the consumer retains the option to buy a potentially better product in the future hence the decision of when to buy may be just as important for consumers as the decision of what to buy this trade off cannot be accounted for in the static framework the purpose of this paper is to remedy these shortcomings of static discrete choice models in durable goods markets with particular attention paid to technological change and the dynamics of new products adoption the paper presents a dynamic model of consumer demand for differentiated durable products that explicitly accounts for consumers expectations of future product quality and consumers outflow from the market that arises endogenously from their purchase decisions in this model the consumer faces a sequence of static discrete choice problems over a non stationary choice set we show that for a subclass of random utility models which include the multinomial logit and the mcfadden 1978 generalized extreme value gev model there exists a scalar valued sufficient statistic that determines the value of the option to postpone the purchase this allows us to model industry evolution over a vastly reduced state space and to formalize the consumer s decision of when to buy as an optimal stopping problem a solution to that problem defines the hazard rate of product adoptions while the nested discrete choice model determines the alternative specific purchase probabilities integrating individual decisions over the population distribution generates rich dynamics of aggregate and product level sales the paper proceeds to present monte carlo evidence that ignoring the time dimension of consumer choice will induce a downward bias in the estimates of consumer preferences over quality sometimes reversing the sign of the coefficients

alcohol taxes and labor market outcomes abstract we present reduced form estimates of the effect of alcohol taxes on employment weekly work hours and wages the reduced form estimates are meaningful in two ways first they provide estimates of the effect of an important public policy tool alcohol taxes and second they can be used to evaluate hypotheses about the structural effects of alcohol use on labor market outcomes estimates indicate that there is a weak and indeterminate relationship between alcohol taxes and labor market outcomes this implies that alcohol use does not adversely affect labor market outcomes and is inconsistent with findings from previous studies

measuring the business stealing cannibalization and market expansion effects of entry in the u s motion picture exhibition market using a large and comprehensive theater level database covering over 18 billion in theater revenues over a five year period i document the extent and nature of business stealing revenue cannibalization and market expansion that occurred during the height of the 1990 s boom in movie theater construction

estimating multiple discrete choice models an application to computerization returns buyers in many markets face multiple discrete choices they can purchase multiple units as well as multiple brands at the same time this paper presents a multiple discrete choice model for the analysis of differentiated products demand users maximize profits by choosing the number of units of each brand they purchase i estimate the model using micro level data on the demand for personal computers i use the estimated demand structure to assess the welfare gains from computerization and technological innovation in peripherals the estimated return on investment in personal computers is 92 moreover a 10 increase in the performance to price ratio of microprocessors leads to a 2 2 gain in the estimated user surplus the personal computer pc market is of interest to industrial organization economists because of its size the continual technological change and above all because of the farreaching implications of pcs on the economy as a whole several distinct features make pc demand difficult to model pcs are a differentiated durable good in constant technological evolution moreover buyers make multiple discrete choices firms according to our data spread their purchases of pcs over different brands at the same time they buy pcs in blocks several units of each brand that they have chosen the aim of the paper is to present a model that captures these features and to use this model to estimate the welfare gains from computerization classical discrete choice models allow one choice among mutually exclusive alternatives in contrast the proposed framework allows users to demand multiple units and multiple brands the model can be applied to other cases of multiple discrete choices e g the composition of airline fleets car holdings per household the fields of the faculty in economics departments household cereals consumption or any other good consumed in more than one variety during a relevant time period although pervasive multiple discrete choice problems have received little attention because of their complexity a central issue regarding the pc market is the current controversy in the economics literature about the computerization puzzle this puzzle stems from the empirical finding that computerization has had no effect on firm productivity griliches and siegel 1991 and morrison and berndt 1990 contrary to those results hendel 1994 and lichtenberg 1995 using more disaggregate data than most previous studies report excess returns to computerization this indicates that data aggregation may have created the computerization puzzle in this paper i present a model consistent with the basic

consumer choice on ecologically efficient water heaters marketing strategy and policy implications in japan abstract this study examines how consumers select ecologically efficient water heaters in japan energy conservation in household water heating is increasingly important for reducing an amount of co 2 emission because the share of water heating in household energy consumption is approximately 30 recently japanese households have widely used ecologically efficient electric heat pump water heaters eco cute or gas fired water heaters eco jozu the total number of such efficient water heaters sold in japan was more than 2 5 million at the end of 2008 this study investigates various factors and impacts of marketing strategy for promoting the appliances in japan we apply mixed and nested logit models to a disaggregated choice data on water heaters from 2004 to 2008 this study considers retail energy prices a government financial support and marketing activities as important factors for appliance selection in addition we consider consumers housing attributes such as floor space and age of building this empirical study finds two business implications one of the two implications is that an increase in an energy price may enhance a choice probability of eco cute and eco jozu because a price increase invites consumer s consciousness on energy conservation so that a cost reduction on energy consumption becomes essential in a use of the efficient appliances the other implication is that marketing activities especially by recommendations from sales representatives and or housing suppliers are important for consumer behaviors the other important findings are discussed in this study this business experience in japan is useful to the other countries where ecologically efficient water heaters are not popular at the current moment

quality adjusted price indexes and the willig condition abstract this paper provides a graphical explanation of willig s condition for developing consistent price indexes for quality change the framework also describes how the single crossing condition generalizes the willig condition

estimation of own and cross price elasticities of alcohol demand in the uk a pseudo panel approach using the living costs and food survey 2001 2009 the estimation of price elasticities of alcohol demand is valuable for the appraisal of price based policy interventions such as minimum unit pricing and taxation this study applies a pseudo panel approach to the cross sectional living cost and food survey 2001 2 2009 to estimate the own and cross price elasticities of off and on trade beer cider wine spirits and ready to drinks in the uk a pseudo panel with 72 subgroups defined by birth year gender and socioeconomic status is constructed estimated own price elasticities from the base case fixed effect models are all negative and mostly statically significant p 0 05 off trade cider and beer are most elastic 1 27 and 0 98 and off trade spirits and on trade ready to drinks are least elastic 0 08 and 0 19 estimated cross price elasticities are smaller in magnitude with a mix of positive and negative signs the results appear plausible and robust and could be used for appraising the estimated impact of price based interventions in the uk

package size and price discrimination in the paper towel market abstract estimates from a structural model of consumer behavior and firm conduct are used to decompose the extent to which quantity discounts for paper towels are consistent with second degree price discrimination as opposed to cost differences across sizes counterfactual exercises assuming that firms offer only one package size or charge uniform prices across sizes indicate that competition in the multi roll package size segment results in increased consumer surplus and lower prices for all consumers

replacement cycles income distribution and dynamic price discrimination this article analyses how income distribution intellectual property rights and other regulatory policies such as minimum quality standards determine pricing strategies in a dynamic context where a monopolist periodically introduces new generations or upgrades of a durable good discrimination through quality and screening in this article takes place in a context where consumers buy several versions of the durable good during their lifetime instead of a single version as in inderst s 2008 or koh s 2006 it also differs from glass 2001 in that an equilibrium may emerge in which different consumer types replace their durable generations with different frequencies our modelling is motivated by stylized facts from the last brazilian pof household budget survey

dynamic efficiencies of the 1997 boeing mcdonnell douglas merger we evaluate the welfare effects of the 1997 boeing mcdonnell douglas merger in the medium sized wide body aircraft industry we find that the merger led to lower prices to explain the price drop we develop a dynamic oligopoly game with learning by doing we quantify the welfare effects of the merger by incorporating both increased market power and merger efficiencies from accelerated learning by doing our dynamic analysis indicates that net consumer surplus increased by as much as 5 14 billion whereas a static model ignoring efficiencies of learning by doing predicts a 0 92 billion loss

unanticipated shocks and the maintenance and replacement of durable goods abstract this paper investigates how a durable goods owner responds to a once for all unanticipated shock in a stationary state market this problem is examined in the context of housing the circumstances are determined under which a landlord will respond in each of the following five ways i abandon his building immediately ii run down his building optimally and then abandon iii operate his building forever iv demolish his building immediately and reconstruct a new building on the site and v run down his building demolish it and reconstruct a new building on the site the analogous cases for other durable goods should be obvious

tools or toys the impact of high technology on scholarly productivity i introduction and motivation in the past several decades investment that makes communication easier has increased rapidly in the united states and other developed economies since the mid 1980s a combination of technical change and deregulation has also reduced long distance telephone rates in the united states by 50 reported by allen 1995 pitney bowes 1997 reported that fax usage increased by 20 between 1996 and 1997 alone and electronic mail e mail unknown before 1985 is ubiquitous today popular discussion of a wide range of additional examples of rapidly declining prices and explosive growth of the use of telecommunications is provided by cairncross 1997 attempts to measure the impact on aggregate total factor and labor productivity of these supposedly productivity enhancing investments in broad reaching technical improvements such as computing machinery and communications equipment have not met with great success as in morrison 1997 but see greenan and mairesse 1996 1 an alternative to measuring effects on the broader economy is to measure the impact of generalized technical change on productivity in specific activities observed at the micro level an earlier literature including griliches 1958 and trajtenberg 1989 has clearly traced the effect of specific innovations in raising productivity in specific sectors of the economy this article expands on that tradition by trying to identify the effect of the recent broad revolution in communications on one activity scholarly publishing we propose studying scholarly publishing before and after technical change greatly lowered communication costs we examine in particular whether increasing ease of communication has altered scholars choices about their methods of production and whether those methods yielded changes in the productivity of scholarly activity that are consistent with increasing access to new communications technologies 2 in section ii we discuss a model of the production process in scholarly writing in relation to the cost of communications in section iii we describe the unique data set we assembled to examine the relation between technical change and scholarly productivity section iv presents the results of using these data to test the hypotheses that we develop and section v compares coauthored to solo authored studies and provides a suggestion for the increased prevalence of the former section vi offers a consistent explanation for most of the results ii a model of scholarly production the example that we use in this study of the impact of technology is the nature and outcomes of the choices of co workers by authors of scholarly publications in economics the importance of team research has been stressed by a number of authors studying the economics of innovation including dasgupta 1988 who also presents a research summary so that our specific example has broader implications for the study of technical change has the decline in the cost of communication altered scholars choices in a way consistent with these technologies increasing scholarly productivity in examining scholarly productivity we focus on research output in particular we view scholars as having three production choices 1 work solo s 2 work with close by coauthor s c or 3 work with distant coauthor s d in the model in this section the scholar is assumed to choose a production technology that maximizes his or her scholarly productivity measured as the quality of the article produced in section vi we a dopt an alternative characterization of a scholar s choices we assume that the scholar has a wide range of potential research activities to choose among and has perfect knowledge of the productivity p valued in dollars of all potential matches s c sub i member of c and d sub i member of d 3 each match generates one solo equivalent article per period

a penny for your quotes patent citations and the value of innovations the use ofpatents in economic research has been seriously hindered by the fact that patents vary enormously in their importance or value and hence simple patent counts cannot be informative about innovative output the purpose of this article is to put forward patent counts weighted by citations as indicators of the value of innovations thereby overcoming the limitations of simple counts the empirical analysis of a particular innovation computed tomography scanners indeed shows a close association between citation based patent indices and independent measures of the social value of innovations in that field moreover the weighting scheme appears to be nonlinear increasing in the number of citations implying that the informational content of citations rises at the margin as in previous studies simple patent counts are found to be highly correlated with contemporaneous rd however here the association is within afield over time rather than cross sectional

how do households choose quality and time to replacement for a rapidly improving durable good abstract many durable goods particularly in the high technology sector of the economy experience rapid quality improvement as a result replacement is typically due to obsolescence rather than breakdown and replacement cycles are relatively short when these goods are vertically differentiated consumers must make two important inter related choices upon making a purchase what quality level to buy and how long to wait between purchases in this paper we analyze how these two decisions relate to underlying preferences and to each other both theoretically and empirically we demonstrate how a single tenuous assumption in a commonly used theoretical model can drive the relationships we would predict when we take this model to the data this highlights the necessity of a more direct empirical analysis in our empirics we show that quality choice and replacement cycle length rcl are generally positively correlated we also find evidence of non monotonic relationships between quality choice and marginal utility of quality and rcl choice and marginal utility of money that is households who value quality more don t always buy higher quality pcs and households who value money less don t always buy more frequently ceteris paribus our results provide new insights into the nature of durable goods demand the proper characterization of markets and market segments and welfare measures

paying for health insurance the trade off between competition and adverse selection we use data on health plan choices by employees of harvard university to compare the benefits of insurance competition with the costs of adverse selection moving to a voucher type system induced significant adverse selection with a welfare loss of 2 to 4 percent of baseline spending but increased competition reduced harvard s premiums by 5 to 8 percent the premium reductions came from insurer profits so while harvard was better off the net effect for society was only the adverse selection loss adverse selection can be minimized by adjusting voucher amounts for individual risk we discuss how such a system would work governments are increasingly turning to market forces as a way to limit the cost of social insurance traditionally social insurance programs were operated as nonmarket goods governments mandated participation in a central program collected revenues to finance the program and ran the insurance system there was no role for competition among suppliers in providing the basic benefit as the costs of social insurance have increased however the centralized model of social insurance is coming under increasing strain in the united states for example recent proposals have called for replacing the medicare program with a health care voucher for the elderly aaron and reischauer 1995 cutler 1996 the voucher would guarantee people a basic insurance plan but the plans would be privately run competition among plans would generate plan premiums and enrollments similarly longstanding proposals for social security reform have called for replacing the current system with a system of individual accounts where people would make saving investment and annuitization decisions on their own advisory council on social security 1996 feldstein 1996 the trend is not just domestic in the united kingdom the national health service has moved to encourage more competition in recent years with the establishment of hospital trusts that bid for patients and partially fixed payments to physicians

alternative panel estimates of alcohol demand taxation and the business cycle this paper uses a new technique of estimating dynamic heterogeneous panels developed by pesaran shin and smith 1999 on state level alcohol consumption as a function of income taxes and cyclical variables pooled mean group pmg estimators provide an alternative to extremes of pooling the data assuming slope homogeneity and estimating individual states assuming complete heterogeneity postsample tests indicate that a conventional fixed effects model outperforms both the pmg estimator and individual state estimators despite the heterogeneity of the sample current levels of taxation appear to have little effect on alcohol consumption and alcohol is found to be a procyclical good

optimal monetary policy with endogenous entry and product variety deviations from long run price stability are optimal in the presence of endogenous entry and product variety in a sticky price model in which price stability would be optimal otherwise long run inflation deflation is optimal when the benefit of variety to consumers falls short of exceeds the market incentive for creating that variety the desired markup price indexation exacerbates this mechanism plausible preference specifications and parameter values justify positive long run inflation rates however short run price stability around this non zero trend is close to optimal even in the presence of endogenously time varying desired markups that distort the intertemporal allocation of resources

gains from trade in used goods evidence from automobiles abstract i investigate the welfare effects of trade liberalization by exploiting a natural policy experiment in the economy of cyprus a 1993 law relaxed import restrictions on used vehicles and enabled the importation of second hand japanese automobiles into the country this led to a dramatic shift of consumer purchases from new to used cars and a substantial expansion of the overall market welfare gains computed from a structural demand system average 2000 per purchaser per year over a four year period after the policy change the findings are suggestive of the potential for substantial gains from liberalizing trade in used goods

quantity quality and the welfare effects of us airline deregulation in this paper we employ a method for estimationg quality adjusted demand to calculate measures of the change in consumer suruplus due to us airline deregulation the quality adjusted estimates of the price elasticity of demand indicate that consumers are from 25 to 50 more sensitive to changes in air fares than unadjusted estimates would suggest changes in unadjusted consumer surplus overstate the net welfare gains from deregulation by roughly a factor of two strongly suggesting that adjustments for quallity of service are essential to welfare analysis of regulatory changes in this industry

housing quality maintenance and rehabilitation this paper investigates a representative landlord s profit maximization problem in a stationary economy the landlord must decide on the quality of his housing units at the time of construction maintenance expenditure over the life of the building and the time of demolition or rehabilitation the analysis can be applied to other problems with similar economic structure notably equipment and durable good maintenance overhaul and replacement

costs of adjustment and the spatial pattern of a growing open city this paper investigates the effect of costs of adjustment on the dynamic characteristics of intra urban resource allocation the analysis is concentrated on the development pattern of an open city within a system of many cities both in steady state and in variable state economies competitive equilibrium of the urban system as a whole is also discussed and compared to pareto optimum allocation some of the results that characterize the resource allocation under static analysis are reestablished for the dynamic case as well but others that follow from comparative statics are shown to be incorrect under the dynamic analysis

investment under uncertainty the case of replacement investment decisions we analyze the determinants of replacement investment decisions in a contingent claims model with maintenance and operation cost uncertainty we find that the optimal time between replacements is increasing in the volatility of cost the purchase price of a new asset and the corporate tax rate and is decreasing in the systematic risk of cost the salvage value of the asset and the investment tax credit the optimal time between replacements can either increase or decrease with an increase in the depreciation rate extensions of the model to examine the effects of technological and tax policy uncertainty on replacement investment decisions give intuitive but striking results uncertainty about the arrival of a technological innovation that would decrease maintenance and operation cost results in a significant decrease in replacement investment uncertainty in a tax law change that would encourage investment decreases current investment and uncertainty in a tax law change that would discourage investment increases current investment

energy use and appliance ownership in ireland abstract this paper examines household energy use and appliance ownership in ireland logit regression analyses on a large micro dataset reveal how household characteristics can help explain the ownership of energy using appliances using ols regression models we explore the factors affecting residential energy demand conditional on appliance ownership results suggest that the methods of space and water heating employed by a household are even more important than electrical appliances in explaining domestic energy usage however the stock of appliances must be included in such models so that results will not be biased the methods employed in this paper can be easily adopted for studies of household energy use in other countries where household expenditure survey data are available

the microeconomics of manufacturing modernization programs abstract manufacturing modernization programs are designed to improve the competitiveness of small and medium sized manufacturers by accelerating their use of best practice technologies justification for these programs is most often cast in terms of past slow rates of adoption international economic competitiveness and market failures in the provision of information these frameworks however do not adequately address policy and programmatic issues related to program design financing and program evaluation using a microeconomic model based on the firm and industry level effects of these programs we examine the importance of spillover benefits from modernization efforts both horizontal spillovers to rivals of program clients and vertical spillovers to clients customers and the implications for these policy and programmatic issues

the demand for alcohol the differential response to price although several studies indicate that drinking is responsive to price little work has focused on whether prices have a differential effect on light moderate or heavy drinking this study examines the price responsiveness of the demand for alcohol whether heavy drinkers are less sensitive to price than light or moderate drinkers the study uses data on alcohol consumption on the 1983 national health interview survey the results indicate that both light and heavy drinkers are much less price elastic than moderate drinkers further we cannot reject the hypothesis that the very heaviest drinkers have perfectly price inelastic demands