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The influence of goods' quality on their price indices

Author

Listed:
  • Zyamalov, V.

    (Russian Presidential Academy of National Economy and Public Administration (RANEPA), Moscow, Russia)

  • Turuntseva, M.

    (Russian Presidential Academy of National Economy and Public Administration (RANEPA), Moscow, Russia
    Gaidar Institute for Economic Policy, Moscow, Russia)

Abstract

This paper provides an example of applying the hedonic method of adjusting price indices that takes into account the impact of changes in the quality of goods on their consumer price. With first attempts to apply dating back to the beginning of the XX century, and being finally formalized by Griliches in 1961, the method allows us to divide the observed price change into a part determined by inflationary processes and a part associated with changes in consumer qualities of goods. In foreign literature, the method has received wide coverage; it has been applied to the prices of a wide variety of goods: from consumer electronics to air tickets in the US. Currently, the method is often used to study the real estate market. At the same time, in the Russian literature there are relatively few works considering this method. In this paper, the authors attempted to apply the method to prices of consumer electronics (laptops) and used cars. Also, the authors present updated results from previously published works related to mobile phones and TVs. The application of the method showed that it allows obtaining adjusted values of price indices that ate significantly different from simple observable prices index.

Suggested Citation

  • Zyamalov, V. & Turuntseva, M., 2024. "The influence of goods' quality on their price indices," Journal of the New Economic Association, New Economic Association, vol. 62(1), pages 196-209.
    • Handle: RePEc:nea:journl:y:2024:i:62:p:196-209
    DOI: 10.31737/22212264_2024_1_196-209
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    References listed on IDEAS

    as
    1. Triplett, Jack E, 1969. "Automobiles and Hedonic Quality Measurement," Journal of Political Economy, University of Chicago Press, vol. 77(3), pages 408-417, May/June.
    2. Marina Turuntseva & Vadim Zyamalov, 2022. "Hedonic Price Indices: Application to the Russian Market," HSE Economic Journal, National Research University Higher School of Economics, vol. 26(3), pages 429-449.
    3. Konstantin Zhitkov & Tatiana Ratnikova, 2014. "The construction of hedonic price indices for fauvists’ paintings," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 35(3), pages 59-85.
    4. David H. Good & Robin C. Sickles & Jesse C. Weiher, 2008. "A Hedonic Price Index For Airline Travel," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(3), pages 438-465, September.
    5. John S. Greenlees & Robert McClelland, 2011. "Does Quality Adjustment Matter for Technologically Stable Products? An Application to the CPI for Food," American Economic Review, American Economic Association, vol. 101(3), pages 200-205, May.
    6. Nikita Petrov & Tatiana Ratnikova, 2017. "The price index for the paintings of Henri Matisse: The sensitivity to the method of construction and connection with stock market and art indices," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 47, pages 49-73.
    7. Jorge Fernandez-Cornejo & Sharon Jans, 1995. "Quality-Adjusted Price and Quantity Indices for Pesticides," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(3), pages 645-659.
    8. David Wasshausen & Brent R. Moulton, 2006. "The Role of Hedonic Methods in Measuring Real GDP in the United States," BEA Papers 0067, Bureau of Economic Analysis.
    9. Jing Wu & Yongheng Deng & Hongyu Liu, 2014. "House Price Index Construction in the Nascent Housing Market: The Case of China," The Journal of Real Estate Finance and Economics, Springer, vol. 48(3), pages 522-545, April.
    10. Frederick V. Waugh, 1928. "Quality Factors Influencing Vegetable Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 10(2), pages 185-196.
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    Keywords

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    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling

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