When Do Matched-Model and Hedonic Techniques Yield Similar Measures?

Abstract

Hedonic techniques were developed to control for quality differences across goods and over time in order to construct constant-quality aggregate price measures. When the available data are a panel of high-frequency data on models whose characteristics are constant over time, matched-model price indexes can also be used to obtain constant quality price measures. We show this by demonstrating that, given data of this type, certain matched-model indexes yield price measures that are numerically close to those obtained using hedonic techniques.

This paper is a condensed version of a paper that was presented at the CRIW workshop on Price Measurement at the NBER Summer Institute, July 31-August 1, 2000 and is available at the NBER website.