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Bias and inefficiency in quality-adjusted hedonic regression analysis

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  • Ludwig Von Auer
  • John Brennan

Abstract

Numerous quality-adjusted hedonic price-trend studies based on computer prices have provided support to widely held suspicions that officially released price indices are not accurately measuring the price declines occurring in many information technology (IT) products. If provable, then general price inflation is being overestimated and, consequently, real GDP is being underestimated. Existing evidence, however, is inconclusive. First, empirical findings for IT products other than computers are essentially non-existent and, secondly, estimation bias is inherent in the hedonic regression technique most commonly employed. This article presents an unbiased method together with an estimated quality-adjusted price trend for laser printers (1993-2004).

Suggested Citation

  • Ludwig Von Auer & John Brennan, 2007. "Bias and inefficiency in quality-adjusted hedonic regression analysis," Applied Economics, Taylor & Francis Journals, vol. 39(1), pages 95-107.
    • Handle: RePEc:taf:applec:v:39:y:2007:i:1:p:95-107
    DOI: 10.1080/00036840500427841
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    References listed on IDEAS

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    1. T. Stengos & E. Zacharias, 2006. "Intertemporal pricing and price discrimination: a semiparametric hedonic analysis of the personal computer market," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(3), pages 371-386, April.
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    3. Cowling, Keith & Cubbin, John, 1972. "Hedonic Price Indexes for United Kingdom Cars," Economic Journal, Royal Economic Society, vol. 82(327), pages 963-978, September.
    4. 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.
    5. Silver, Mick & Heravi, Saeed, 2001. "Scanner Data and the Measurement of Inflation," Economic Journal, Royal Economic Society, vol. 111(472), pages 383-404, June.
    6. Ernst R. Berndt & Neal J. Rappaport, 2001. "Price and Quality of Desktop and Mobile Personal Computers: A Quarter-Century Historical Overview," American Economic Review, American Economic Association, vol. 91(2), pages 268-273, May.
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    1. L von Auer & M Trede, 2012. "The dynamics of brand equity: a hedonic regression approach to the laser printer market," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 63(10), pages 1351-1362, October.

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