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Price Indexes for Microcomputers: An Exploratory Study

In: Price Measurements and Their Uses

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  • 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.

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This chapter was published in:

  • Murray Foss & Marylin Manser & Allan Young, 1993. "Price Measurements and Their Uses," NBER Books, National Bureau of Economic Research, Inc, number foss93-1, July.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 7798.

    Handle: RePEc:nbr:nberch:7798

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    1. Epple, Dennis, 1987. "Hedonic Prices and Implicit Markets: Estimating Demand and Supply Functions for Differentiated Products," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 59-80, February.
    2. Michaels, Robert, 1979. "Hedonic Prices and the Structure of the Digital Computer Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 27(3), pages 263-75, March.
    3. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    4. Robert J. Gordon, 1987. "The Postwar Evolution of Computer Prices," NBER Working Papers 2227, National Bureau of Economic Research, Inc.
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