Investigating Consumer Purchase Behavior in Related Technology Product Categories

Abstract

We present a framework of durable goods purchasing behavior in related technology product categories that incorporates the following aspects unique to technology product purchases. First, it accounts for consumers' anticipation of declining prices (or increasing quality) over time. Second, the durable nature of technology products implies that even if two categories are related as complements, consumers may stagger their purchases over several periods. Third, the forward-looking consumer decision process, as well as the durable nature of technology products, implies that a consumer's purchase in one category will depend on the anticipated price and quality trajectories of all categories. As a potential aid to future researchers, we also lay out the data requirements for empirically estimating the parameters of our model and the consequences of not having various elements of these data on our ability to estimate the parameters. The data available for our empirical analysis are household-level information on category-level first-time adoption decisions in three categories—personal computers, digital cameras, and printers. Our results reveal a strong complementary relationship between the three categories. Policy simulations based on a temporary price decrease in any one category provide interesting insights into how consumers would modify their adoption behavior over time and also across categories as a consequence of the price decrease.