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Sampling Frequency and the Comparison between Matched-Model and Hedonic Regression Price Indexes

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Author Info
Deltas, George
Zacharias, Eleftherios

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Abstract

Matched-model price indexes generally overestimate quality-adjusted prices, because the price/performance ratio of models sold in consecutive periods is worse than that of new models. This "unrepresentativeness" of the sample potentially might be reduced by obtaining higher-frequency data, thus increasing the fraction of models that are matched. We propose a set of conformable indexes to test this hypothesis. Using computer prices from the Buy Direct press, we find, contrary to initial expectations, that the bias in the matched-model price index increases with the sampling frequency. The bias is reduced if the high-frequency index is constructed using only long-lived models. These results suggest that models that last for only a brief time are models for which the price/performance ratio has deteriorated very rapidly. Thus increasing the sampling frequency without purging short-lived models actually increases the selection bias.

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Publisher Info
Article provided by American Statistical Association in its journal Journal of Business and Economic Statistics.

Volume (Year): 22 (2004)
Issue (Month): 1 (January)
Pages: 94-106
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Handle: RePEc:bes:jnlbes:v:22:y:2004:i:1:p:94-106

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  1. Stengos, T. & Zacharias, E., 2003. "Intertemporal Pricing and Price Discrimination: A Semiparametric Hedonic Analysis of the Personal Computer Market," Working Papers 2003-9, University of Guelph, Department of Economics. [Downloadable!]
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This page was last updated on 2009-10-27.


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