Working Paper: NBER ID: w3378
Authors: Ernst R. Berndt; Zvi Griliches
Abstract: In this paper we focus on alternative procedures for calculating and interpreting quality-adjusted price indexes for microcomputers, based on a variety of estimated hedonic price equations. Our data set comprises an unbalanced panel for 1265 model observations from 1982 to 1988, and includes both list and discount prices. We develop and implement empirically a specification test for selecting preferable hedonic price equations, and consider in detail the alternative interpretations of dummy variable coefficients having time and age, vintage and age, and all of the time, age, and vintage dummy variables as regressors. We then calculate a variety of quality-adjusted price indexes; for the Divisja indexes we employ estimated hedonic price equations to predict prices of unobserved models (pre-entry and post-exit). Although our indexes show a modest amount of variation, we find that on average over the 1982-88 time period in the US, quality-adjusted real prices for microcomputers decline at about 28% per year.
Keywords: price indexes; microcomputers; hedonic pricing
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Technological advancements (O33) | Price adjustments (L11) |
| Model introduction (Y20) | Price adjustments (L11) |
| Improvements in technology (O39) | Lower quality-adjusted prices (P22) |
| Model entry (Y60) | Repricing of existing models (D43) |