The Advanced Technology Program Assessing Outcomes (2001) / Chapter Skim
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Estimating Future Benefits from ATP Funding of Digital Data Storage
Estimating Future Benefits from ATP Funding of Digital Data Storage
Pages 239-248
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From page 239... ...
This study generates these estimates by drawing on previous economic modeling to develop and apply a novel new method for estimating consumer benefits from advanced technology under development or under consideration. The resulting cost index model is tested by estimating expected consumer welfare gains from two ATP-funded innovations in digital data storage (DDS)
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From page 240... ...
Applying the new evaluation method, we estimate the expected benefits to consumers from the optical tape technology to exceed $1 billion, and from the linear scanning technology, $2 billion, both taken over a five-year period, and conservatively estimated. This study focuses on consumer benefits from early commercialization of the technologies, and ignores benefits accruing to the innovator, or to other manufacturers via knowledge spillovers, as well as benefits from second-generation products.
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From page 241... ...
Our approach allows for the gradual diffusion of the new technology, and we express the model' s parameters as probability density functions to reflect uncertainties over future or estimated parameter values. We also extend Bresnahan's method to have it reflect consumer preferences for specific product characteristics speed, for instance and to take into account the fact that those preferences may affect the product's success in a competitive marketplace.
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From page 242... ...
To construct the index, we adjust nominal unit prices of offthe-shelf devices to reflect consumer preference for faster data transfer rates, larger capacities, and lower file access times.2 We assume that these "shadow values" decline over time, reflecting consumers' declining marginal utilities. For example, an extra gigabyte of storage capacity is more valuable to a consumer who has only ten gigabytes storage than to a consumer with 100 gigabytes.
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From page 243... ...
Both are measured relative to the baseline, and neither is theoretically superior to the other. The Tornqvist index is an equally weighted geometric average of the two.3 USING THE MODEL TO ESTIMATE CONSUMER BENEFITS FROM TWO ATP-FUNDED PROJECTS We apply the cost-index model to estimate expected consumer welfare gains from two innovations in digital data storage (DDS)
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We estimate the shadow values by hedonic regression analysis of recent retail prices and performance characteristics. These regressions also produce estimated standard errors, which we use to construct the initial-period probability distributions for the shadow values.
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Figure 2 shows how the gains from linear scanning technology are expected to accumulate over our five-year forecasting window.4 Optical Tape We estimate that the optical tape technology, if successfully introduced, would yield $1.5 billion (median value) in present value consumer benefits over five years relative to the best existing technology.
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defending products continue to make inroads into traditional tape storage markets, actual benefits will likely be lower than expected. We find the benefits estimates to be relatively insensitive to changes in the performance parameters, and somewhat more sensitive to price and rate of adoption data.
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From page 247... ...
If knowledge spillovers occur, our benefit estimates here may be low. On the other hand, if disk drive arrays continue to make inroads into traditional tape storage markets, our benefit estimates will be high.
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From page 248... ...
2000. Estimating Future Consumer Benefits from ATP-Funded Innovation: The Case of Digital Data Storage.
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