Why Did Semiconductor Price Indexes Fall So Fast in the 1990s? A Decomposition

Aizcorbe, Ana

doi:10.1093/ei/cbj027

Cited by 22 publications

(16 citation statements)

References 34 publications

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“…It is precisely in this industry that prices have fallen at an astonishing rate of 36% per year in the 1990s. This pricing pattern can be attributed almost exclusively to quality increases that are associated with product innovations (Aizcorbe 2006). Although the alternative pricing pattern under Bertrand competition is by definition not available, this example does suggest that low prices can also emerge under Cournot competition.…”

Section: Introductionmentioning

confidence: 89%

Dynamic efficiency of Cournot and Bertrand competition: input versus output spillovers

Hinloopen

Vandekerckhove

2009

J Econ

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We consider the efficiency of Cournot and Bertrand equilibria in a duopoly with substitutable goods where firms invest in process R&D that generates input spillovers. Under Cournot competition firms always invest more in R&D than under Bertrand competition. More importantly, Cournot competition yields lower prices than Bertrand competition when the R&D production process is efficient, when spillovers are substantial, and when goods are not too differentiated. The range of cases for which total surplus under Cournot competition exceeds that under Bertrand competition is even larger as competition over quantities always yields the largest producers' surplus.

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Section: Introductionmentioning

confidence: 89%

Dynamic efficiency of Cournot and Bertrand competition: input versus output spillovers

Hinloopen

Vandekerckhove

2009

J Econ

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“… Notes : The top panel shows the average growth rate of microprocessor performance during the three phases. The bottom panel shows the rate of decline of price per quality unit, taken from Grimm [], Aizcorbe [] and Aizcorbe, Oliner and Sichel []. As can be seen from the table, the growth of performance is broadly consistent with the declines in price per quality unit reported in previous studies.…”

Section: Technological Progress In Microprocessorsmentioning

confidence: 99%

“…Such declines result from increases in quality (performance) over time because of the adoption of new vintages of capital equipment, with the average cost of microprocessors over their lifetimes remaining roughly constant. Aizcorbe [] finds that average cost per microprocessor computed over its lifetime (which corresponds to

\overset{c}{true}

in the paper), increased slightly (by 3.7%) during 1993–1999, and she concludes that reduction in cost per microprocessor through learning could not have been a driver of the acceleration.…”

Section: Explanations For the Acceleration And Slowdownmentioning

confidence: 99%

A Model of Technological Progress in the Microprocessor Industry

Pillai

2013

The J Industrial Economics

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This paper develops a model of technological progress in the microprocessor industry that connects the seemingly disparate engineering and economic measures of technological progress. Technological progress in the microprocessor industry is driven by the repeated adoption of higher quality vintages of capital equipment produced by the upstream semiconductor equipment industry. The model characterizes the optimal adoption decision of a microprocessor firm and the resulting rate of technological progress. In conjunction with parameters estimated using a new dataset of the microprocessor industry, the model suggests explanations for the acceleration in technological progress during 1990–2000 and the subsequent slowdown.

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“…1 We attribute the price declines to consumer heterogeneity over willingness to pay for quality and show that not accounting for this type of consumer heterogeneity can understate inflation growth in this sector.…”

Section: Introductionmentioning

confidence: 93%

Implications of Consumer Heterogeneity on Price Measures for Technology Goods

Shapiro¹,

Aizcorbe²

2010

SSRN Journal

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Using a new dataset on household purchases of personal computers (PCs), we document positive correlations between buyers' incomes and the prices they pay for seemingly identical PCs. These results suggest that firms may be successful at separating the market and charging different prices to consumers with different levels of willingness to pay. We consider the implications of this kind of market separation for price and quality measurement via a theoretical model based on Mussa and Rosen (1978). The model suggests that, in markets like these, standard methods that do not account for this heterogeneity can understate inflation in a cost-of-living context. Consistent with the model, our empirical work shows that controlling for income yields indexes that show slower price declines than seen in standard indexes. This understatement of the cost-of-living measure likely mitigates the unrelated upward biases found in recent studies by Bils (2009), Erickson and Pakes (2010), Broda and Weinstein (2010).

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Why Did Semiconductor Price Indexes Fall So Fast in the 1990s? A Decomposition

Cited by 22 publications

References 34 publications

Dynamic efficiency of Cournot and Bertrand competition: input versus output spillovers

Dynamic efficiency of Cournot and Bertrand competition: input versus output spillovers

A Model of Technological Progress in the Microprocessor Industry

Implications of Consumer Heterogeneity on Price Measures for Technology Goods

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