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Quality-Adjusted Prices for the American Automobile Industry: 1906-1940

In: The Economics of New Goods

  • Daniel M. G. Raff
  • Manuel Trajtenberg

We push the span of hedonic price calculations for automobiles backwards towards the industry's birth. Most of the real change that occurred between 1906 and 1982 occurred between 1906 and 1940. During these years, hedonic prices fell at an average annual rate of 5%. The pace was brisker still during the first 8-12 years. Our measured declines can be decomposed into price and quality components. Our calculations suggest that 60% of the overall decline 1906-1940 was due to process innovation and only 40% to product innovation or quality change per se. Regressors representing mechanical systems matter in these calculations.

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This chapter was published in:
  • Timothy F. Bresnahan & Robert J. Gordon, 1996. "The Economics of New Goods," NBER Books, National Bureau of Economic Research, Inc, number bres96-1, October.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 6065.
    Handle: RePEc:nbr:nberch:6065
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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    1. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, October.
    2. Makoto Ohta & Zvi Griliches, 1976. "Automobile Prices Revisited: Extensions of the Hedonic Hypothesis," NBER Chapters, in: Household Production and Consumption, pages 325-398 National Bureau of Economic Research, Inc.
    3. Ernst R. Berndt & Zvi Griliches, 1993. "Price Indexes for Microcomputers: An Exploratory Study," NBER Chapters, in: Price Measurements and Their Uses, pages 63-100 National Bureau of Economic Research, Inc.
    4. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557.
    5. Bresnahan, T.F. & Raff, D.M.G., 1993. "Technological Heterogeneity, Adjustment Costs, and the Dynamics of Plant Shutdown Behavior: The American Motor Vehicule Industry in the Time of the Great Depression," Papers 93-09, Columbia - Graduate School of Business.
    6. Pakes, Ariel & Berry, Steven & Levinsohn, James A, 1993. "Applications and Limitations of Some Recent Advances in Empirical Industrial Organization: Price Indexes and the Analysis of Environmental Change," American Economic Review, American Economic Association, vol. 83(2), pages 241-46, May.
    7. Triplett, Jack E, 1969. "Automobiles and Hedonic Quality Measurement," Journal of Political Economy, University of Chicago Press, vol. 77(3), pages 408-17, May/June.
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