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MEASURING THE WELFARE GAIN FROM PERSONAL COMPUTERS.

The welfare gain to consumers from the introduction of personal computers (PCs) is estimated. A simple model of consumer demand is formulated that uses a slightly modified version of standard preferences. The modification permits marginal utility, and hence total utility, to be finite when the consu...

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Published in:Economic Inquiry Vol. 51; no. 1; pp. 336 - 348
Main Authors: GREENWOOD, JEREMY, KOPECKY, KAREN A.
Format: Article
Published: Wiley-Blackwell Jan2013
Subjects:
United States
United States. Bureau of Economic Analysis
United States. Bureau of Labor Statistics
Personal computers
Consumption (Economics)
Consumer behavior
Consumers
Utility theory
Consumer price indexes
Gross domestic product
Online Access:View this record in EBSCOhost
Summary:The welfare gain to consumers from the introduction of personal computers (PCs) is estimated. A simple model of consumer demand is formulated that uses a slightly modified version of standard preferences. The modification permits marginal utility, and hence total utility, to be finite when the consumption of computers is zero. This implies that the good will not be consumed at a high enough price. It also bounds the consumer surplus derived from the product. The model is calibrated/estimated using standard national income and product account data. The welfare gain from the introduction of PCs is 2%-3% of consumption expenditure.