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Innovation and price: the case of digital cameras

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  • Daniel Fehder
  • Edward Nelling
  • Jeffrey Trester

Abstract

This study examines a hedonic regression model of digital camera prices using data collected from an internet price comparison service. We find that a small number of product characteristics explains most of the variation in camera prices. In addition, the model demonstrates substantial downward pressure on camera prices during the time period considered. We also examine technological innovation shocks to determine their impact on product prices. We find that the corresponding price reaction exhibits gradual adjustment over time, providing evidence of some degree of anticipation of the innovation, as well as a post-innovation price shock. This study also demonstrates the power of web-based shopping services as a new and novel source of data for econometric analysis.

Suggested Citation

  • Daniel Fehder & Edward Nelling & Jeffrey Trester, 2009. "Innovation and price: the case of digital cameras," Applied Economics, Taylor & Francis Journals, vol. 41(17), pages 2229-2236.
    • Handle: RePEc:taf:applec:v:41:y:2009:i:17:p:2229-2236
    DOI: 10.1080/00036840701222488
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    References listed on IDEAS

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    1. Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
    2. Steven Caudill & Daniel Gropper, 1997. "A quality-adjusted price index for mainframe computers," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1605-1610.
    3. Ariel Pakes, 2003. "A Reconsideration of Hedonic Price Indexes with an Application to PC's," American Economic Review, American Economic Association, vol. 93(5), pages 1578-1596, December.
    4. Kenneth Brown, 2000. "Hedonic price indexes and the distribution of buyers across the product space: an application to mainframe computers," Applied Economics, Taylor & Francis Journals, vol. 32(14), pages 1801-1808.
    5. Bartik, Timothy J, 1987. "The Estimation of Demand Parameters in Hedonic Price Models," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 81-88, February.
    6. Nelson, Randy A & Tanguay, Tim L & Patterson, Christopher D, 1994. "A Quality-Adjusted Price Index for Personal Computers," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(1), pages 23-31, January.
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    Cited by:

    1. L. Wei & J. Xiao, 2012. "Factors affecting the take-off of innovative technologies: evidence from digital cameras," Applied Economics, Taylor & Francis Journals, vol. 44(32), pages 4143-4152, November.
    2. Lashkaripour, Ahmad, 2020. "Weight-based quality specialization," Journal of International Economics, Elsevier, vol. 127(C).

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