Disparities in the prices of new and old models when they coexist in the market: Some econometric estimates

This paper is concerned with the econometric modelling of prices of similar goods of different vintages coexisting in a market. Updated models of branded consumer durables are often launched annually. Of interest is not only the differential pricing over the life of the update, but the effect of the update on the prices of existing vintages of the branded model. This paper uses micro scanner (EPOS, bar-code) monthly data between June 1992 and December 1995 for 14″ television sets in the UK to provide an econometric analysis of pricing behaviour for a particular make and model and then, more generally, for the market as a whole. Two quite different formulations are used to test hypotheses as to the effect on prices of existing models of the launch of a new, updated model. Both approaches provide results consistent with each other.