Measuring innovations in the Japanese LCD TVs using market data

Abstract

Quality-adjusted price indexes based on a discrete choice model and a weighted hedonic function are estimated using market data for Liquid Crystal Display (LCD) TVs obtained from a large Internet price comparison service in Japan. Implicit values of attributes were used to unify marginal values of attributes into a scalar quality measure, and thus, we measure innovations by the price shift while controlling the levels of the attributes. We also report estimates on welfare gains through the discrete choice approach.

Keywords:

• innovation
• measurement
• discrete choice
• LCD TV

JEL Classification:

• O33

Acknowledgements

We thank Mitsuhisa Ohdo and Kakaku.com, Inc., for providing us the relevant database for this research. Our thanks are also due to Hiroshi Ohashi, Shigenori Shiratsuka and Kay Kawashima for many valuable comments on the draft of this manuscript. This research has been supported financially by the Economic and Social Research Institute, Cabinet Office, Government of Japan.

Notes

¹Shiratsuka (1999) and Triplett (2006) offer an encompassing review to this subject. Applications are diverse, for example, Ohashi's (2003) VCR, Chwelos's (2003) laptop computer, Utsunomiya's (2004) railway service, Reis and Silva (2006) and Matas and Raymond's (2009) automobile, amongst others.

²Available at the Ministry of Internal Affairs and Communications, Government of Japan.

³The number of customers visiting this website for a certain model is called the counts of PV.

⁴AGE is previously defined as τ _jt .

⁵Here, we ignore individual characteristics because of data restriction.

⁶See, for example, Train (2003) for details.