NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A Reconsideration of Hedonic Price Indices with an Application to PC's

Ariel Pakes

NBER Working Paper No. 8715
Issued in January 2002
NBER Program(s):   IO   PR

This paper provides a justification for hedonic price indices and details the properties of hedonic price functions. The analysis is done in a market setting in which a finite number of goods, each defined by its characteristics, interact. We note that proper hedonic indices can be constructed from the same data currently used to construct matched model indices. Since the matched model index does not incorporate price changes for goods which exit, and the goods that exited tend to be those goods whose prices fall, the matched model index has a selection problem which biases it upwards. The hedonic index does not have this problem. We illustrate with a new study of price indices for PC's. The hedonic index shows steep price declines in every year. On average, the matched model indices indicate no price fall at all and one commonly used matched model index is negatively correlated with the hedonic. We also construct and compare alternative price indices used either in research or by the federal statistical agencies. Of these the one that seems to work well is a Pasche style hedonic. Its advantage is that since it does not require computation of the current period's hedonic function, it is easier to use when monthly timetables need to be met.

download in pdf format
   (424 K)

email paper

This paper is available as PDF (424 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w8715

Published: Pakes, Ariel. "A Reconsideration Of Hedonic Price Indexes With An Application To PC's," American Economic Review, 2003, v93(5,Dec), 1578-1614. citation courtesy of

Users who downloaded this paper also downloaded these:
Bernard, Jensen, and Schott w11404 Importers, Exporters, and Multinationals: A Portrait of Firms in the U.S. that Trade Goods
Ahn, Khandelwal, and Wei w15706 The Role of Intermediaries in Facilitating Trade
Diewert Hedonic Regressions. A Consumer Theory Approach
White, Abel, Berndt, and Monroe w10427 Hedonic Price Indexes for Personal Computer Operating Systems and Productivity Suites
Griliches Hedonic Price Indexes for Automobiles: An Econometric of Quality Change
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us