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Understanding Price Variation Across Stores and Supermarket Chains: Some Implications for CPI Aggregation Methods

Author

Listed:
  • Lorraine Ivancic

    (Centre for Applied Economic Research, The University of New South Wales)

  • Kevin J. Fox

    (School of Economics, The University of New South Wales)

Abstract

The empirical literature on price indices consistently finds that aggregation methods have a considerable impact, particularly when scanner data are used. This paper outlines a novel approach to test for the homogeneity of goods and hence for the appropriateness of aggregation. A hedonic regression framework is used to test for item homogeneity across four supermarket chains and across stores within each of these supermarket chains. We find empirical support for the aggregation of prices across stores which belong to the same supermarket chain. Support was also found for the aggregation of prices across three of the four supermarket chains.

Suggested Citation

  • Lorraine Ivancic & Kevin J. Fox, 2010. "Understanding Price Variation Across Stores and Supermarket Chains: Some Implications for CPI Aggregation Methods," Discussion Papers 2010-17, School of Economics, The University of New South Wales.
    • Handle: RePEc:swe:wpaper:2010-17
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    File URL: http://research.economics.unsw.edu.au/RePEc/papers/2010-17.pdf
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    Cited by:

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    2. Daniel Melser & Michael Webster, 2021. "Multilateral Methods, Substitution Bias, and Chain Drift: Some Empirical Comparisons," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(3), pages 759-785, September.
    3. Ludwig Auer, 2014. "The Generalized Unit Value Index Family," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(4), pages 843-861, December.
    4. W. Erwin Diewert & Kevin J. Fox & Jan de Haan, 2015. "Weekly versus Monthly Unit Value Price Indexes," Discussion Papers 2015-15, School of Economics, The University of New South Wales.
    5. Fox, Kevin J. & Syed, Iqbal A., 2016. "Price discounts and the measurement of inflation," Journal of Econometrics, Elsevier, vol. 191(2), pages 398-406.
    6. Kevin J, Fox. & Iqbal A. Syed, 2016. "Price Discounts and the Measurement of Inflation: Further Results," Discussion Papers 2016-05, School of Economics, The University of New South Wales.
    7. Charles Howell & Emili Grifell‐Tatjé, 2023. "An Index Approach to Measuring Product Differentiation: A Hedonic Analysis of Airfares," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 69(4), pages 952-974, December.
    8. Diewert, W. Erwin & Fox, Kevin J. & de Haan, Jan, 2016. "A newly identified source of potential CPI bias: Weekly versus monthly unit value price indexes," Economics Letters, Elsevier, vol. 141(C), pages 169-172.

    More about this item

    Keywords

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    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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