Hedonic price measurement: the CCC approach

An accurate measurement of general price inflation is an essential prerequisite for sound economic analysis and prudent policy-making. Regrettably, numerous hedonic regression studies (predominately focusing on computers) have suggested that due to product quality changes, national statistical agencies are not computing unbiased price-trend estimates. This paper argues that the time-honored hedonic estimation procedure—the adjacent year regression (AYR) method—is generally neither unbiased nor robust. Consequently, the continuously changing coefficient (CCC) approach is introduced. Utilizing various hedonic techniques, several quality-adjusted price-trends for laser printers (1992–2005) were estimated and compared with the one officially released by the statistical agency.