Thursday, November 27, 2008

Tivo and Innovation Uptake

Justin Wolfers wonders why only 3 in 10 households have a tivo or DVR equivalent when the net present value of such a system is roughly $250,000 for the average American household (you can quibble with this number, but it is a rough estimate.) We would expect people to use such a system if the marginal benefits exceed the marginal costs, but clearly that is the case here, even if Justin's assumptions are way off. This is an important and fascinating question and should give every economist pause.

For my part, I do not have a tivo or similar device, but I do have access to the internet and usually watch reruns there. This bypasses the need for an additional device beyond my computer and I get roughly the same benefit, provided the show is available online, which is increasingly the case. If we add in people that utilize ABC's great online resources or, I wonder how this affects the number of people that have some alternative to regular programming? Is this a problem of measurement or are people really not benefiting from existing technology?

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