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Hedonic Price Indexes and the Matched Models Approach

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  • Mick Silver
  • Saeed Heravi
Abstract
We consider three approaches to estimating quality‐adjusted price changes: (i) the dummy variable approach from a hedonic regression, (ii) a superlative or exact hedonic index and (iii) a matching technique—a technique akin to that used by statistical offices. The dummy variable approach is prevalent in the literature and has been used for independent estimates of quality changes when commenting on sources of error in consumer price indexes. However, the availability of scanner data provides an opportunity to utilize data on the prices (unit values), volumes and quality characteristics of a much wider range of transactions and to consider methods less restrictive than the dummy variable approach. The practical use of superlative or exact hedonic index and matching techniques using scanner data is explored, and the results from all three methods are compared. A feature of the paper is the breadth of the empirical work. It not only encompasses three different approaches, but extends across four different types of consumer durables. The manner in which the three approaches relate to each other is explored and the implications for quality‐adjusted price changes is discussed.

Suggested Citation

  • Mick Silver & Saeed Heravi, 2004. "Hedonic Price Indexes and the Matched Models Approach," Manchester School, University of Manchester, vol. 72(1), pages 24-49, January.
    • Handle: RePEc:bla:manchs:v:72:y:2004:i:1:p:24-49
    DOI: 10.1111/j.1467-9957.2004.00378.x
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    References listed on IDEAS

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    1. Feenstra, Robert C, 1995. "Exact Hedonic Price Indexes," The Review of Economics and Statistics, MIT Press, vol. 77(4), pages 634-653, November.
    2. repec:ucp:bknber:9780226304557 is not listed on IDEAS
    3. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    4. Stewart, Kenneth G & Jones, J C H, 1998. "Hedonics and Demand Analysis: The Implicit Demand for Player Attributes," Economic Inquiry, Western Economic Association International, vol. 36(2), pages 192-202, April.
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    6. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1.
    7. Diewert, W. E., 1976. "Exact and superlative index numbers," Journal of Econometrics, Elsevier, vol. 4(2), pages 115-145, May.
    8. Mick Silver, 1999. "An Evaluation Of The Use Of Hedonic Regressions For Basic Components Of Consumer Price Indices," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(1), pages 41-56, March.
    9. Michael J. Boskin, 1998. "Consumer Prices, the Consumer Price Index, and the Cost of Living," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 3-26, Winter.
    10. Mick Silver, 1995. "Elementary Aggregates, Micro‐Indices And Scanner Data: Some Issues In The Compilation Of Consumer Price Indices," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 41(4), pages 427-438, December.
    11. Christos Ioannidis & Mick Silver, 1999. "Estimating exact hedonic indexes: An application to UK television sets," Journal of Economics, Springer, vol. 69(1), pages 71-94, February.
    12. Katharine G. Abraham & John S. Greenlees & Brent R. Moulton, 1998. "Working to Improve the Consumer Price Index," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 27-36, Winter.
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    Cited by:

    1. Xosé-Luís Varela-Irimia, 2014. "Age effects, unobserved characteristics and hedonic price indexes: The Spanish car market in the 1990s," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 5(4), pages 419-455, November.
    2. Bettina Aten & Marshall Reinsdorf, 2010. "Comparing the Consistency of Price Parities for Regions of the U.S. in an Economic Approach Framework," BEA Papers 0098, Bureau of Economic Analysis.
    3. Victor Ginsburgh & Jianping Mei & Michael Moses, 2006. "On the computation of art indices in art," ULB Institutional Repository 2013/7290, ULB -- Universite Libre de Bruxelles.

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