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Scanner Data, Product Churn and Quality Adjustment

Author

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  • W. Erwin Diewert
  • Chihiro Shimizu

Abstract

High technology products are characterized by the rapid introduction of new models and the corresponding disappearance of older models. The paper addresses the problems associated with the construction of price indexes for these products. Several methods for the quality adjustment of product prices are considered: hedonic regressions that use either product characteristics (Time Dummy Characteristics regressions) or the product itself as the ultimate characteristic (Time Product Dummy regressions). The paper also considered regressions where the economic importance of products is taken into account (weighted versus unweighted regressions). The indexes which were generated by the hedonic regressions were compared to traditional index numbers that did not make any special adjustments for quality change. The Expanding Window variant of a Weighted Time Product Dummy regression was used to address the chain drift problem. Finally, the estimation of systems of inverse demand functions was also used to generate various price indexes. The alternative approaches were implemented using Japanese price and quantity data on laptop sales in Japan for the 24 months over the years 2020-2021.

Suggested Citation

  • W. Erwin Diewert & Chihiro Shimizu, 2026. "Scanner Data, Product Churn and Quality Adjustment," NBER Working Papers 34897, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:34897
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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