Online Price Index with Automated Product Replacement: The Closest-Match Approach

28 Pages Posted: 26 Dec 2018 Last revised: 12 Jul 2019

See all articles by Manuel Bertolotto

Manuel Bertolotto

University of San Andres (UMSA) - Department of Economics; Universidad de San Andrés

Date Written: December 4, 2018

Abstract

Current methodologies to calculate a consumer price index (CPI) with online prices have shown an abnormal downward trend. This paper introduces a new methodology that avoids this problem by effectively mitigating the effects of product turnover. The method mimics the decision-making process of specialists that review forced-replacement items at statistical offices, yet is scalable so that price indices can be calculated with thousands of products without manual intervention. The method reflects a change in paradigm for how old and new varieties of products are linked. While the traditional approach looks for a replacement when an item is discontinued, the closest-match approach searches for a comparable item every time a new product enters the market.

The price index presented in this study is remarkably similar to the traditional CPI for every country in the sample, namely Germany, the Netherlands, Spain, the United Kingdom, and the United States.

Keywords: online price index, product introduction, quality change, scraped prices

JEL Classification: C43, C82, E31

Suggested Citation

Bertolotto, Manuel, Online Price Index with Automated Product Replacement: The Closest-Match Approach (December 4, 2018). Available at SSRN: https://ssrn.com/abstract=3296073 or http://dx.doi.org/10.2139/ssrn.3296073

Manuel Bertolotto (Contact Author)

University of San Andres (UMSA) - Department of Economics ( email )

Vito Dumas 284
B1644BID Victoria, Buenos Aires
Argentina

Universidad de San Andrés ( email )

Vito Dumas 284
(1644) Victoria, Pcia
Buenos Aires, Buenos Aires 1644
Argentina

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