High-Frequency Substitution and the Measurement of Price Indexes
AbstractThis paper investigates the use of high-frequency scanner data to construct price indexes. In the presence of inventory behavior, purchases and consumption by individuals differ over time. Cost-of-living indexes can still be constructed using data on purchases. For weekly data on canned tuna, the paper contrast two different types of price indexes: fixed-base and chained indexes. Only the former are theoretically correct, and in fact, the chained indexes have a pronounced upward bias for most regions of the U.S. This upward bias can be caused by consumers purchasing goods for inventory. The paper presents some direct statistical support for inventory behavior being the cause of the upward bias, though advertising and special displays also have a very significant impact on shopping patterns.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8176.
Date of creation: Mar 2001
Date of revision:
Publication status: published as High-Frequency Substitution and the Measurement of Price Indexes , Robert C. Feenstra, Matthew D. Shapiro. in Scanner Data and Price Indexes , Feenstra and Shapiro. 2003
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Other versions of this item:
- Robert C. Feenstra & Matthew D. Shapiro, 2003. "High-Frequency Substitution and the Measurement of Price Indexes," NBER Chapters, in: Scanner Data and Price Indexes, pages 123-150 National Bureau of Economic Research, Inc.
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
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