Annual data on retail sales, price, and number of manufacturers for sixty-one consumer durable products marketed in the U.S. were collected by the author. Retail sales for major appliances, housewares, and home electronic products as reported in various summary and special issues of Merchandising Week, Merchandising, and Dealerscope Merchandising were assembled. Price data for each product are
... [Show full abstract] adjusted using the 1967 Consumer Price Index. Annual data on the number of producers were obtained from Thomas’ Register of American Manufacturers. Data on other important exogenous variables determining the diffusion processes of new products were compiled from various issues of Annual Statistical Abstracts of the United States.
The results show that the factors determining PCH indirectly change SPD. Besides the indirect factors, direct changes in trend variables also accelerate SPD. The results also document the strong and consistent significance of the income distribution. The price of a new product declines more quickly when the middle class possess a larger share of income. The velocity of money was also strongly and consistently significant, however it should be noted that the velocity of money is itself believed to be influenced by the level of communicative efficiency. Improvements in communication channels affect the velocity of money, which in turn influences the speed of adoption of a new product. Thus, INF is also found to be an important factor in the determination of the speed of adoption of a new product, but once V is included, the coefficient on INF decreases dramatically. As was noted in section III, many proxy variables are affected by the time trend. The IMP variable turns out to be insignificant. This may be because D (the dummy variable for electronic and/or video/audio products) has already explained the competitiveness of imported products over the years. We note that P0 and D are negatively related to PCH. This implies that electronic products and products with higher initial prices relative to income level tend to have faster decreasing prices. The estimated coefficient of YEAR is insignificant; P0, D, IDS, V , and INF explain both price declines and speed of diffusion very well.