THE APPLICATION OF AN HEDONIC MODEL TO A QUALITY ADJUSTED PRICE INDEX FOR COMPUTER PROCESSORS.
Item
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Title
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THE APPLICATION OF AN HEDONIC MODEL TO A QUALITY ADJUSTED PRICE INDEX FOR COMPUTER PROCESSORS.
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Identifier
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AAI8629684
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identifier
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8629684
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Creator
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DULBERGER, ELLEN R.
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Contributor
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Michael Grossman
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Date
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1986
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Language
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English
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Publisher
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City University of New York.
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Subject
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Economics, General
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Abstract
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Computer processors are products which undergo rapid technological change. The resulting quality changes create difficult problems in constructing meaningful price indexes. One way to deal with the problem of missing prices for models not observed in the reference period is to estimate them. An hedonic model provides the means to do so.;Three issues are addressed in the estimation and application of an hedonic model to a quality adjusted price index for output of the computing equipment industry: (1) selection of the appropriate level of aggregation to ensure that the object of analysis matches the output of the industry; (2) proper specification of characteristics to enable full quality adjustment and (3) expansion of the model to deal with technologically induced price disequilibrium which can occur when models embodying new technology are sold at lower prices than existing ones because full market adjustment is not instantaneous.;The computer processor, one box or component of a computing system is chosen for the object of analysis for two compelling reasons: (1) it directly corresponds to output of the industry for which a quality adjusted output price index is needed and (2) when combined with other components of a computing system "quality" or performance evaluation requires a more complicated technique than the hedonic one. Characteristics are chosen whose measurements include a comparable summary of processor speed--equivalent MIPS.;Estimation of an expanded hedonic model indicates that the marketplace for computer processors is rarely in a state of price equilibrium. The findings depict a dynamic and competitive industry. Furthermore, when price equilibrium does not prevail, more often than not, models embodying nonbest technologies are priced alike and higher than models embodying the best.;A Paasche-like price index is constructed which includes observed base period prices and whenever possible, observed reference period prices. Estimates are made from the expanded hedonic equation of missing reference period prices. This quality adjusted price index indicates an average annual price decline of 17.8% for the 1972-1984 period. When combined by the BEA with analogous indexes for three other components of computing equipment, storage devices, printers and displays, the new deflator results in an average price decline in computing equipment of 14.1%.
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Type
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dissertation
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Source
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PQT Legacy CUNY.xlsx
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degree
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Ph.D.
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Program
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Economics
