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Using Scanner Data to Construct CPI Basic Component Indexes

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  • Reinsdorf, Marshall B

Abstract

This article considers how scanner data could be used in constructing component indexes for the U.S. Consumer Price Index. One product, coffee, in two cities generates over 1.8 million observations in just over two years, so coping with the sheer volume of data would be a challenge. Some other findings are (1) some aggregation of prices into 'unit-value' averages is necessary for practical reasons and to avoid bias, (2) chained Laspeyres indexes are very high, (3) 'modified' Laspeyres indexes have some upward bias but much less than a true Laspeyres index, (4) Fisher ideal or modified Edgeworth indexes perform well, and (5) aggregating prices across outlets to form city-level unit values reduces the discrepancies between index-number formulas.

Suggested Citation

  • Reinsdorf, Marshall B, 1999. "Using Scanner Data to Construct CPI Basic Component Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 152-160, April.
  • Handle: RePEc:bes:jnlbes:v:17:y:1999:i:2:p:152-60
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    References listed on IDEAS

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    1. Jerry A. Hausman, 1996. "Valuation of New Goods under Perfect and Imperfect Competition," NBER Chapters,in: The Economics of New Goods, pages 207-248 National Bureau of Economic Research, Inc.
    2. Hausman, Jerry A & Newey, Whitney K, 1995. "Nonparametric Estimation of Exact Consumers Surplus and Deadweight Loss," Econometrica, Econometric Society, vol. 63(6), pages 1445-1476, November.
    3. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
    4. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    5. Timothy F. Bresnahan & Robert J. Gordon, 1996. "The Economics of New Goods," NBER Books, National Bureau of Economic Research, Inc, number bres96-1, January.
    6. Pollak, Robert A., 1989. "The Theory of the Cost-of-Living Index," OUP Catalogue, Oxford University Press, number 9780195058703.
    7. Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-676, September.
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    Citations

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    Cited by:

    1. Kota Watanabe & Tsutomu Watanabe, 2014. "We construct a Törnqvist daily price index using Japanese point of sale (POS) scannerdata spanning from 1988 to 2013. We find the following. First, the POS based inflation rate tends to be about 0.5 ," CARF F-Series CARF-F-342, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    2. Melser, Daniel & Syed, Iqbal, 2007. "Life Cycle Pricing and the Measurement of Inflation," MPRA Paper 16722, University Library of Munich, Germany, revised 07 Jul 2008.
    3. Ivancic, Lorraine & Fox, Kevin J., 2013. "Can dissimilarity indexes resolve the issue of when to chain price indexes?," Economics Letters, Elsevier, vol. 118(1), pages 6-9.
    4. W. Erwin Diewert & Kevin J. Fox & Jan de Haan, 2015. "Weekly versus Monthly Unit Value Price Indexes," Discussion Papers 2015-15, School of Economics, The University of New South Wales.
    5. Robert J Hill, 2004. "Inflation Measurement for Central Bankers," RBA Annual Conference Volume,in: Christopher Kent & Simon Guttmann (ed.), The Future of Inflation Targeting Reserve Bank of Australia.
    6. 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.
    7. Jack E. Triplett, 2003. "Using Scanner Data in Consumer Price Indexes. Some Neglected Conceptual Considerations," NBER Chapters,in: Scanner Data and Price Indexes, pages 151-162 National Bureau of Economic Research, Inc.
    8. Ivancic, Lorraine & Erwin Diewert, W. & Fox, Kevin J., 2011. "Scanner data, time aggregation and the construction of price indexes," Journal of Econometrics, Elsevier, vol. 161(1), pages 24-35, March.
    9. Kota Watanabe & Tsutomu Watanabe, 2014. "Estimating Daily Inflation Using Scanner Data: A Progress Report," UTokyo Price Project Working Paper Series 020, University of Tokyo, Graduate School of Economics.
    10. Iqbal Syed & Daniel Melser, 2008. "Prices over the Product Life Cycle: An Empirical Analysis," Discussion Papers 2008-25, School of Economics, The University of New South Wales.
    11. Diewert, W. Erwin & Fox, Kevin J. & de Haan, Jan, 2016. "A newly identified source of potential CPI bias: Weekly versus monthly unit value price indexes," Economics Letters, Elsevier, vol. 141(C), pages 169-172.
    12. Jan de Haan & Rens Hendriks & Michael Scholz, 2016. "A Comparison of Weighted Time-Product Dummy and Time Dummy Hedonic Indexes," Graz Economics Papers 2016-13, University of Graz, Department of Economics.

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