Constructing a Quality-Adjusted Price Index for a Heterogeneous Oligopoly
20 Pages Posted: 30 Jun 2004
Abstract
Both the theory and practice of using hedonic regressions to remove quality effects in price indexes are implicitly developed for monopolistic competitive markets. In this paper, we theoretically and practically analyze the application of a standard hedonic regression for an oligopoly. In the theoretical work, we recast how for an oligopoly the standard hedonic regression may be unstable. Then in the empirical work, we recommend using the weighted imputation method for constructing an index and estimating separate hedonic regressions for market segments. We apply these recommendations to estimating a quality-adjusted price index for the Australian passenger vehicle market and find they make a substantial difference.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Testing for 'Monopoly' Market Power When Products are Differentiated in Quality
-
Measuring Quality-Adjusted Inflation Rates for a Heterogeneous Oligopoly
By David Prentice and Xiangkang Yin
-
Market Power, Multimarket Contact and Pricing: Some Evidence from the US Automobile Market
By Nina Leheyda