Estimating computer depreciation using online auction data

Personal computer prices decline rapidly with age. The price of a four-year-old used computer is almost one tenth of the price of a new one. This paper provides new evidence on why prices of personal computers decline so rapidly as they age, using online auction data from eBay. An innovative feature of the dataset is that it contains actual transaction prices for both desktops and notebooks, as well as exact age in days. By using a sample of used Dell computers, we examine the causes of this rapid decline. We find that age is not important due to minimal physical deterioration. Prices decline because used computers have inferior technical characteristics compared to new ones. In addition, a computer loses about 20-25 percentage points of its value the instant that it is sold. Finally, some auction characteristics are significant.