New Products, Quality Changes, and Welfare Measures Computed from Estimated Demand Systems
AbstractThis paper examines the construction of a price index based on an estimated-demand system. In principle the method examined can produce a price index that takes account of the introduction of new products and quality changes in existing products. However, I isolate two key assumptions that have to be made in order to interpret the demand estimates into welfare measures. Using estimates of a brand-level demand system for ready-to-eat cereal, I demonstrate the empirical importance of the assumptions. For the data I use, depending on the interpretation of the demand estimates, a price index can range between a 35% increase over the five years examined to a 2.4% decrease. © 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoArticle provided by MIT Press in its journal Review of Economics and Statistics.
Volume (Year): 85 (2003)
Issue (Month): 2 (May)
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Web page: http://mitpress.mit.edu/journals/
Other versions of this item:
- Aviv Nevo, 2001. "New Products, Quality Changes and Welfare Measures Computed From Estimated Demand Systems," NBER Working Papers 8425, National Bureau of Economic Research, Inc.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Aviv Nevo, 1998.
"Measuring Market Power in the Ready-to-Eat Cereal Industry,"
NBER Working Papers
6387, National Bureau of Economic Research, Inc.
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