Econometric issues in hedonic price indices: the case of internet service providers

Abstract

Researchers in hedonic studies frequently encounter the problems of the choice of functional forms, the use of pooled regression using time dummies vs period to period regression, and the unit of measurement of the product. This article examines these issues through the study of Internet service providers in Canada from 1993 to 2000. A series of tests are employed to evaluate the best procedure. We find that the commonly used log-linear equation with period to period regression and hourly rate charged gives a robust result compared with the more flexible translog function. The quality-adjusted price index declines at about 15% per year.

Hedonic Price Indexes for Residential Housing: A Survey, Evaluation and Taxonomy

“…The first group ignores it completely. The second group acknowledges thatP t is biased, refers the reader to Goldberger (1968) or Kennedy (1981), notes that the bias is typically small and then proceeds to ignore it (see e.g., Triplett, 2004;Hill et al, 2009;de Haan, 2010;and Yu and Prud'homme, 2010). The third group actually uses the P * t formula, although then usually in the context of the hedonic imputation method discussed in Section 4.3 (see Malpezzi et al, 1998;Coulson, 2008;and Dorsey et al, 2010).…”

The Increasing Deflationary Influence of Consumer Digital Access Services

“…19 Nakamura and Steinsson (2012) identify this phenomenon-unchanging item prices-in the microdata for BLS trade price indexes as contributing to spuriously low "exchange rate pass-through" estimates. 20 Stranger and Greenstein (2007) and Yu and Prud'homme (2010) find price declines on the order of 15 percent per year for the 1990s in the United States and Canada, respectively. Greenstein and McDevitt (2011) and Flamm and Herrera (2017) report more modest declines for the 2000s.…”

The Increasing Deflationary Influence of Consumer Digital Access Services

“…That is, the sharp declines we find in digital service prices, augmented by the rising share of these services in the overall basket, magnify the marked reported slowdown in the PCE inflation rate since 1987 by nearly ½ percentage point (figure 4). 21 20 Stranger and Greenstein (2007) and Yu and Prud'homme (2010) find price declines on the order of 15 percent per year for the 1990s in the United States and Canada, respectively. Greenstein and McDevitt (2011) and Flamm and Herrera (2017) report more modest declines for the 2000s.…”