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Price Measurement Using Scanner Data: Time‐Product Dummy Versus Time Dummy Hedonic Indexes

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  • Jan de Haan
  • Rens Hendriks
  • Michael Scholz

Abstract

This paper compares two model‐based multilateral price indexes: the time‐product dummy (TPD) index and the time dummy hedonic (TDH) index, both estimated by expenditure‐share weighted least squares regression. The TPD model can be viewed as the saturated version of the underlying TDH model, and we argue that the regression residuals are “distorted toward zero” due to overfitting. We decompose the ratio of the two indexes in terms of average regression residuals of the new and disappearing items. The decomposition aims to explain the conditions under which the TPD index suffers from quality‐change bias or, more generally, lack‐of‐matching bias. An example using scanner data on packaged men's T‐shirts illustrates our framework.

Suggested Citation

  • Jan de Haan & Rens Hendriks & Michael Scholz, 2021. "Price Measurement Using Scanner Data: Time‐Product Dummy Versus Time Dummy Hedonic Indexes," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(2), pages 394-417, June.
    • Handle: RePEc:bla:revinw:v:67:y:2021:i:2:p:394-417
    DOI: 10.1111/roiw.12468
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    References listed on IDEAS

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    Cited by:

    1. Masahiro Higo & Shigenori Shiratsuka, 2022. "Was Inflation Observed under the First Wave of the COVID-19 Spread in Japan? Scanner Data Evidence for Retailers in Tokyo," Keio-IES Discussion Paper Series 2022-013, Institute for Economics Studies, Keio University.
    2. Beck, Günter W. & Carstensen, Kai & Menz, Jan-Oliver & Schnorrenberger, Richard & Wieland, Elisabeth, 2023. "Nowcasting consumer price inflation using high-frequency scanner data: Evidence from Germany," Discussion Papers 34/2023, Deutsche Bundesbank.
    3. Jacek Białek, 2023. "Improving quality of the scanner CPI: proposition of new multilateral methods," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(3), pages 2893-2921, June.
    4. Higo, Masahiro & Shiratsuka, Shigenori, 2023. "Consumer price measurement under the first wave of the COVID-19 spread in Japan: Scanner data evidence for retailers in Tokyo," Japan and the World Economy, Elsevier, vol. 65(C).
    5. von Auer, Ludwig & Weinand, Sebastian, 2022. "A nonlinear generalization of the country-product-dummy method," Discussion Papers 45/2022, Deutsche Bundesbank.

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