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Durable goods, price indexes and quality change: an application to automobile prices in Italy, 1988-1998

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  • Tomat, Gian Maria

Abstract

The paper analyzes the problems of measurement of durable consumer prices posed by quality change. Theoretical price indexes are defined and used to analyze several empirical methods of estimation of quality adjusted price indexes. The paper shows that hedonic regressions and other quality adjustment methods commonly used by statistical agencies do not always provide reliable price estimators. The analysis suggests that the application of methods of measurement based on chain indexes may remove the measurement problems associated with quality change. The paper includes an application of the theory to the analysis of automobile prices in Italy during the period 1988-1998 JEL Classification: C43, C51, D91

Suggested Citation

  • Tomat, Gian Maria, 2002. "Durable goods, price indexes and quality change: an application to automobile prices in Italy, 1988-1998," Working Paper Series 118, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:2002118
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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp118.pdf
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    Cited by:

    1. Nauro F. Campos & Renata Leite Barbosa, 2009. "Paintings and numbers: an econometric investigation of sales rates, prices, and returns in Latin American art auctions," Oxford Economic Papers, Oxford University Press, vol. 61(1), pages 28-51, January.
    2. Xosé-Luís Varela-Irimia, 2014. "Age effects, unobserved characteristics and hedonic price indexes: The Spanish car market in the 1990s," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 5(4), pages 419-455, November.
    3. Négyesi, Áron, 2003. "Hogyan mérjük az új gazdaságot?. A termékminőség változásának számbavétele árindexek segítségével
      [How can the new economy be measured?. Estimating change in product quality with the help of price
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 988-1001.

    More about this item

    Keywords

    durable goods; elementary index numbers; hedonic regressions; quality change;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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