IDEAS home Printed from https://ideas.repec.org/p/ubc/pmicro/tina_marandola-2017-12.html
   My bibliography  Save this paper

Estimating the Benefits and Costs of New and Disappearing Products

Author

Listed:
  • Diewert, W, Erwin
  • Feenstra, Robert

Abstract

A major challenge facing statistical agencies is the problem of adjusting price and quantity indexes for changes in the availability of commodities. This problem arises in the scanner data context as products in a commodity stratum appear and disappear in retail outlets. Hicks suggested a reservation price methodology for dealing with this problem in the context of the economic approach to index number theory. Feenstra and Hausman suggested specific methods for implementing the Hicksian approach. The present paper evaluates these approaches and suggests some alternative approaches to the estimation of reservation prices. The various approaches are implemented using some scanner data on frozen juice products that are available online.

Suggested Citation

  • Diewert, W, Erwin & Feenstra, Robert, 2017. "Estimating the Benefits and Costs of New and Disappearing Products," Microeconomics.ca working papers tina_marandola-2017-12, Vancouver School of Economics, revised 19 Dec 2017.
  • Handle: RePEc:ubc:pmicro:tina_marandola-2017-12
    as

    Download full text from publisher

    File URL: https://econ2017.sites.olt.ubc.ca/files/2017/12/pdf_paper_erwin-diewert-dp1710.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
    2. Jerry A. Hausman, 1996. "Valuation of New Goods under Perfect and Imperfect Competition," NBER Chapters, in: The Economics of New Goods, pages 207-248, National Bureau of Economic Research, Inc.
    3. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
    4. Jerry Hausman, 2003. "Sources of Bias and Solutions to Bias in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 23-44, Winter.
    5. Diewert, W. Erwin & Fox, Kevin J., 2017. "Substitution Bias in Multilateral Methods for CPI Construction using Scanner Data," Microeconomics.ca working papers erwin_diewert-2017-3, Vancouver School of Economics, revised 23 Mar 2017.
    6. Diewert, W. E. & Wales, T. J., 1988. "A normalized quadratic semiflexible functional form," Journal of Econometrics, Elsevier, vol. 37(3), pages 327-342, March.
    7. W. Erwin Diewert, 1998. "Index Number Issues in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 47-58, Winter.
    8. Sato, Kazuo, 1976. "The Ideal Log-Change Index Number," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 223-228, May.
    9. Hausman, Jerry A & Leonard, Gregory K, 2002. "The Competitive Effects of a New Product Introduction: A Case Study," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 237-263, September.
    10. Hausman, Jerry, 1999. "Cellular Telephone, New Products, and the CPI," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 188-194, April.
    11. E. Rothbarth, 1941. "The Measurement of Changes in Real Income under Conditions of Rationing," Review of Economic Studies, Oxford University Press, vol. 8(2), pages 100-107.
    12. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    13. Hirofumi Uzawa, 1962. "Production Functions with Constant Elasticities of Substitution," Review of Economic Studies, Oxford University Press, vol. 29(4), pages 291-299.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Diewert, Erwin & Fox, Kevin J., 2019. "Productivity Indexes and National Statistics: Theory, Methods and Challenges," Microeconomics.ca working papers erwin_diewert-2019-8, Vancouver School of Economics, revised 25 Apr 2019.
    2. Gabriel Ehrlich & John Haltiwanger & Ron Jarmin & David Johnson & Matthew D. Shapiro, 2020. "Re-Engineering Key National Economic Indicators," NBER Chapters, in: Big Data for Twenty-First-Century Economic Statistics, National Bureau of Economic Research, Inc.
    3. Brynjolfsson, Erik & Collis, Avinash & Diewert, Erwin & Eggers, Felix & FOX, Kevin J., 2019. "GDP-B: Accounting for the Value of New and Free Goods in the Digital Economy," Microeconomics.ca working papers erwin_diewert-2019-6, Vancouver School of Economics, revised 27 Mar 2019.
    4. Diewert, Erwin, 2019. "Quality Adjustment and Hedonics: A Unified Approach," Microeconomics.ca working papers erwin_diewert-2019-2, Vancouver School of Economics, revised 14 Mar 2019.
    5. Thomas von Brasch & Arvid Raknerud & Diana-Cristina Iancu, 2018. "Productivity growth, firm turnover and new varieties," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2018-11, Economic Statistics Centre of Excellence (ESCoE).
    6. Diewert, Erwin & Feenstra, Robert, 2019. "Estimating the Benefits of New Products: Some Approximations," Microeconomics.ca working papers erwin_diewert-2019-3, Vancouver School of Economics, revised 13 Mar 2019.
    7. Diewert, Erwin & Marandola, Tina, 2018. "Scanner Data, Elementary Price Indexes and the Chain Drift Problem," Microeconomics.ca working papers tina_marandola-2018-9, Vancouver School of Economics, revised 10 Oct 2018.
    8. Thomas von Brasch & Diana-Cristina Iancu & Arvid Raknerud, 2018. "Productivity growth, firm turnover and new varieties," Discussion Papers 872, Statistics Norway, Research Department.
    9. Crystal Konny, 2020. "Modernizing data collection for the Consumer Price Index," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 55(1), pages 45-52, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. W. Erwin Diewert & Robert C. Feenstra, 2021. "Estimating the Benefits of New Products," NBER Chapters, in: Big Data for Twenty-First Century Economic Statistics, National Bureau of Economic Research, Inc.
    2. Diewert, Erwin & Feenstra, Robert, 2019. "Estimating the Benefits of New Products: Some Approximations," Microeconomics.ca working papers erwin_diewert-2019-3, Vancouver School of Economics, revised 13 Mar 2019.
    3. Diewert, Erwin, 2019. "Quality Adjustment and Hedonics: A Unified Approach," Microeconomics.ca working papers erwin_diewert-2019-2, Vancouver School of Economics, revised 14 Mar 2019.
    4. Diewert, Erwin & FOX, Kevin J. Fox & SCHREYER, Paul, 2017. "The Digital Economy, New Products and Consumer Welfare," Microeconomics.ca working papers erwin_diewert-2017-12, Vancouver School of Economics, revised 14 Dec 2017.
    5. W. Erwin Diewert & Kevin J. Fox, 2020. "Measuring Real Consumption and CPI Bias under Lockdown Conditions," NBER Working Papers 27144, National Bureau of Economic Research, Inc.
    6. Jerry Hausman, 2002. "Sources of Bias and Solutions to Bias in the CPI," NBER Working Papers 9298, National Bureau of Economic Research, Inc.
    7. Thomas Brasch, 2017. "The import price index with trade barriers: theory and evidence," Empirical Economics, Springer, vol. 52(1), pages 123-141, February.
    8. Diewert, Erwin, 2018. "Duality in Production," Microeconomics.ca working papers erwin_diewert-2018-2, Vancouver School of Economics, revised 06 Feb 2018.
    9. Thomas von Brasch, 2013. "The cost-of-living index with trade barriers," Discussion Papers 751, Statistics Norway, Research Department.
    10. Redding, Stephen J. & Weinstein, David E., 2016. "A Unified Approach to Estimating Demand and Welfare," CEPR Discussion Papers 11421, C.E.P.R. Discussion Papers.
    11. Stephen J Redding & David E Weinstein, 2020. "Measuring Aggregate Price Indices with Taste Shocks: Theory and Evidence for CES Preferences," The Quarterly Journal of Economics, Oxford University Press, vol. 135(1), pages 503-560.
    12. Lukas Mohler & Michael Seitz, 2012. "The gains from variety in the European Union," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(3), pages 475-500, September.
    13. Erik Brynjolfsson & Avinash Collis & W. Erwin Diewert & Felix Eggers & Kevin J. Fox, 2020. "Measuring the Impact of Free Goods on Real Household Consumption," AEA Papers and Proceedings, American Economic Association, vol. 110, pages 25-30, May.
    14. Thomas von Brasch & Arvid Raknerud & Diana-Cristina Iancu, 2018. "Productivity growth, firm turnover and new varieties," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2018-11, Economic Statistics Centre of Excellence (ESCoE).
    15. Lukas Mohler, 2011. "Variety Gains from Trade in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 147(I), pages 45-70, March.
    16. Thomas von Brasch & Diana-Cristina Iancu & Arvid Raknerud, 2018. "Productivity growth, firm turnover and new varieties," Discussion Papers 872, Statistics Norway, Research Department.
    17. Jerry Hausman, 2003. "Sources of Bias and Solutions to Bias in the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 23-44, Winter.
    18. Diewert, W. Erwin & Fox, Kevin J., 2017. "Substitution Bias in Multilateral Methods for CPI Construction using Scanner Data," Microeconomics.ca working papers erwin_diewert-2017-3, Vancouver School of Economics, revised 23 Mar 2017.
    19. David Atkin & Benjamin Faber & Marco Gonzalez-Navarro, 2018. "Retail Globalization and Household Welfare: Evidence from Mexico," Journal of Political Economy, University of Chicago Press, vol. 126(1), pages 1-73.
    20. Diewert, Erwin, 2009. "Cost of Living Indexes and Exact Index Numbers," Economics working papers erwin_diewert-2009-6, Vancouver School of Economics, revised 13 Feb 2009.

    More about this item

    Keywords

    Hicksian reservation prices; virtual prices; Laspeyres; Paasche; Fisher; Törnqvist and Sato-Vartia price indexes;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D60 - Microeconomics - - Welfare Economics - - - General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ubc:pmicro:tina_marandola-2017-12. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.economics.ubc.ca/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Maureen Chin (email available below). General contact details of provider: http://www.economics.ubc.ca/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.