Understanding Price Variation Across Stores and Supermarket Chains: Some Implications for CPI Aggregation Methods

19 Pages Posted: 5 Nov 2013

See all articles by Lorraine Ivancic

Lorraine Ivancic

University of New South Wales (UNSW)

Kevin J. Fox

UNSW Australia Business School, School of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: December 2013

Abstract

The empirical literature on price indices consistently finds that aggregation methods have a considerable impact, particularly when scanner data are used. This paper outlines a novel approach to test for the homogeneity of goods and hence for the appropriateness of aggregation. A hedonic regression framework is used to test for item homogeneity across four supermarket chains and across stores within each of these supermarket chains. We find empirical support for the aggregation of prices across stores which belong to the same supermarket chain. Support was also found for the aggregation of prices across three of the four supermarket chains.

Keywords: aggregation, hedonics, item homogeneity, price indexes, scanner data, unit values

JEL Classification: C43, E31

Suggested Citation

Ivancic, Lorraine and Fox, Kevin J., Understanding Price Variation Across Stores and Supermarket Chains: Some Implications for CPI Aggregation Methods (December 2013). Review of Income and Wealth, Vol. 59, Issue 4, pp. 629-647, 2013. Available at SSRN: https://ssrn.com/abstract=2349920 or http://dx.doi.org/10.1111/roiw.12068

Lorraine Ivancic (Contact Author)

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

Kevin J. Fox

UNSW Australia Business School, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia
(02)9385-3320 (Phone)
(02)9313-6337 (Fax)

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