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Quality-adjusted price indexes for portable computers

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  • Terry Baker

Abstract

Constructing an accurate price index requires controlling for changes in quality. The potential for bias is especially problemaic for rapidly changing goods such as computers. This study extends previous research on quality-adjusted, or hedonic, price indexes for computers by investigating price and quality changes in portable models. In particular, recent research by Nelson et al.(1994) and Berndt et al.(1995) on desktop and portable computers is extended. After adjusting for quality changes, price indexes in this tudy exhibit average declines of 26% to 33% per year. The magnitude of quality-adjusted price changes is consistent with these auhors and with the extensive line of research on quality-adjusted price indexes for computers of various types. The results emphasize the extent of potential bias in estimating price level changes if technological advancement is ignored. Significant potential for bias implies the need to account properly for changes in quality in consructing indexes for both individual product categories and for broad economic indicators.

Suggested Citation

  • Terry Baker, 1997. "Quality-adjusted price indexes for portable computers," Applied Economics, Taylor & Francis Journals, vol. 29(9), pages 1115-1123.
  • Handle: RePEc:taf:applec:v:29:y:1997:i:9:p:1115-1123 DOI: 10.1080/00036849700000002
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    References listed on IDEAS

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    1. repec:ucp:bknber:9780226304557 is not listed on IDEAS
    2. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, January.
    3. Nelson, Randy A & Tanguay, Tim L & Patterson, Christopher D, 1994. "A Quality-Adjusted Price Index for Personal Computers," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(1), pages 23-31, January.
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    Cited by:

    1. Paul Chwelos, 2003. "Approaches to performance measurement in hedonic analysis: Price indexes for laptop computers in the 1990's," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(3), pages 199-224.
    2. Winchester, Niven & Greenaway, David, 2007. "Rising wage inequality and capital-skill complementarity," Journal of Policy Modeling, Elsevier, vol. 29(1), pages 41-54.
    3. P. D. Chwelos & E. R. Berndt & I. M. Cockburn, 2008. "Faster, smaller, cheaper: an hedonic price analysis of PDAs," Applied Economics, Taylor & Francis Journals, vol. 40(22), pages 2839-2856.
    4. Sanja Lutzeyer, 2008. "Estimating Hedonic Prices for Stellenbosch wine," Working Papers 15/2008, Stellenbosch University, Department of Economics.
    5. Paul Windrum, 2004. "Heterogeneous preferences and new innovation cycles in mature industries: the camera industry 1955-1974," Papers on Economics and Evolution 2004-18, Philipps University Marburg, Department of Geography.
    6. Luigi Benfratello & Massimiliano Piacenza & Stefano Sacchetto, 2004. "-What Drives Market Prices in the Wine Industry ? Estimation of a Hedonic Model for Italian Premium Wines," CERIS Working Paper 200411, Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY -NOW- Research Institute on Sustainable Economic Growth - Moncalieri (TO) ITALY.

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