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Quality of Goods and Price Setting for CPUs

Author

Listed:
  • Yuriy Gorodnichenko

    (University of California, Berkeley)

  • Oleksandr Talavera

    (University of Birmingham)

  • Nam Vu

    (University of Birmingham)

Abstract

This paper investigates the link between product quality and price-setting for central processing units (CPUs). Using thousands of price quotes from a large price-comparison website, we find that market fundamentals, such as the number of sellers, median price, share of convenient prices and level of seller stability, are important factors for explaining price stickiness and price dispersion. We demonstrate that calculations of price inflation require conditioning not only on CPU quality but also market fundamentals to ensure that CPU attributes are priced correctly. Failing to do so can result in understatement of CPU price deflation in the sample period.

Suggested Citation

  • Yuriy Gorodnichenko & Oleksandr Talavera & Nam Vu, 2020. "Quality of Goods and Price Setting for CPUs," Discussion Papers 20-23, Department of Economics, University of Birmingham.
    • Handle: RePEc:bir:birmec:20-23
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    References listed on IDEAS

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    More about this item

    Keywords

    price setting; e-commerce; product quality; hedonic pricing; inflation;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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