Price Indexes for Microcomputers: An Exploratory Study
Ernst R. Berndt
In this paper we focus on alternative procedures for calculating and
interpreting quality-adjusted price indexes for microcomputers, based on a
variety of estimated hedonic price equations. Our data set comprises an
unbalanced panel for 1265 model observations from 1982 to 1988, and includes
both list and discount prices. We develop and implement empirically a
specification test for selecting preferable hedonic price equations, and
consider in detail the alternative interpretations of dununy variable
coefficients having time and age, vintage and age, and all of the time, age,
and vintage dummy variables as regressors.
We then calculate a variety of quality-adjusted price indexes; for the
Divisja indexes we employ estimated hedonic price equations to predict
prices of unobserved models (pre-entry and post-exit). Although our indexes
show a modest amount of variation, we find that on average over the 1982-88
time period in the US, quality-adjusted real prices for microcomputers
decline at about 28% per year.
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