TY  - JOUR
AU  - Nevo,Aviv
TI  - New Products, Quality Changes and Welfare Measures Computed From Estimated Demand Systems
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8425
PY  - 2001
Y2  - August 2001
UR  - http://www.nber.org/papers/w8425
L1  - http://www.nber.org/papers/w8425.pdf
N1  - Author contact info:
Aviv Nevo
Department of Economics
Northwestern University
2001 Sheridan Road
Evanston, IL 60208-2600
Tel: 847/491-8212
Fax: 847/491-7001
E-Mail: nevo@northwestern.edu
AB  - This paper examines the construction of a price index based on an estimated demand system.  In principle the method examined can produce a price index that accounts for introduction of new products and quality changes in existing products.  However, I isolate two key assumptions that have to be made in order to interpret the demand estimates into welfare measures. Using estimates of a brand-level demand system for ready-to-eat cereal I demonstrate the empirical importance of the assumptions.  For the data I use, depending on the interpretation of the demand estimates, a price index can range between a 35% percent increase over the five years examined to a 2.4% decrease.
ER  -