Quantifying the Benefits of New Products: The Case of the Minivan / Amil Petrin.

Format:

Book

Author/Creator:

Petrin, Amil.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w8227.

NBER working paper series no. w8227

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Quantifying the Benefits of New Products

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2001.

Summary:

I develop a technique useful for obtaining more precise estimates of demand and supply curves when constrained to market-level data. It augments the estimation routine with data on the average characteristics of consumers that purchase different products. I apply the technique to the automobile market, estimating the economic effects of the minivan introduction. I show that standard approaches yield results that are meaningfully different from those obtained with my extension. I report benefits accruing to both minivan and non-minivan consumers. I complete the welfare picture by measuring the extent of first- mover advantage and of profit cannibalization both initially by the innovator and later by the imitators. My results support a simple economic story where large improvements in consumers' standard of living arise from competition as firms, ignoring the externalities they impose on one another, cannibalize each others profits by continually seeking new goods that give them some temporary market power.

Notes:

Print version record

April 2001.