Technical change, prices and communications technology: Insights from the Local Area Networking industry

We use hedonic regressions to analyse price changes in two categories of Local Area Networking (LAN) equipment: hubs and switches. Constant quality price indexes are constructed from the regressions and contrasted with available indexes constructed for the same type of equipment. We find that prices fell at an average annual rate between 22% and 33% during the 1990s. The results suggest that beside falling prices of inputs (i.e. semiconductors), technical change in the LAN equipment may be responsible for the decrease in the prices of communication equipment during the 1990s.