Hedonic Price Measurement

The CCC Approach

Abstract

An accurate measurement of general price inflation is an essential prerequisite for sound economic analysis and prudent policy-making. Numerous hedonic regression studies (predominantly focusing on computers) have suggested that due to significant product quality changes over time, driven onward by technical progress, national statistical agencies are not compiling and releasing unbiased price-trend estimates. This paper argues, however, that the estimation method commonly applied in hedonic studies is an unsatisfactory one. Therefore, an alternative estimation procedure is introduced. Utilizing this novel technique, a quality-adjusted twelve-year price-trend for laser printers (1992 to 2003) is estimated and compared with the officially published price-trend.