In this paper we construct a number of quality-adjusted price indexes for personal computers in the U.S. marketplace over the 1989- 92 time period. We generalize earlier work by incorporating simultaneously the time, age and vintage effects of computer models into a fully saturated parameterization, and then develop a corresponding specification test procedure. While the simple arithmetic mean of prices of models by year reveals a price decline of about 11% per year, use of a matched model procedure similar to that commonly used by government statistical agencies generates a much larger rate of price decline -- about 20% per year. Since the matched model procedure holds quality constant, it ignores quality change embodied in new models. When data on new and surviving models are used in the estimation of hedonic price equations, a variety of quality-adjusted price indexes can be calculated, with varying interpretations. Although there are some differences, we find that on average these quality-adjusted price indexes decline at about 30% per year, with a particularly large price drop occurring in 1992. Parameters in hedonic price equations for desktop PC models differ from those for mobile PCs. Moreover, quality-adjusted prices fall at a slightly lower AAGR for mobile models (24%) than for desktops (32%). We conclude that taking quality changes into account has an enormous impact on the time pattern of price indexes for PCs.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
4549.
Length: Date of creation: Aug 1995 Date of revision: Handle: RePEc:nbr:nberwo:4549
Note: PR Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A. Phone: 617-868-3900 Email: Web page: http://www.nber.org More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: ().
Related research
Keywords:
Other versions of this item:
Find related papers by JEL classification: L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
Cited by: (explanations, 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.)