Matched-model price indexes generally overestimate quality-adjusted prices, because the price/performance ratio of models sold in consecutive periods is worse than that of new models. This "unrepresentativeness" of the sample potentially might be reduced by obtaining higher-frequency data, thus increasing the fraction of models that are matched. We propose a set of comformable indexes to test this hypothesis. Using computer prices from the Buy Direct press, we find, contrary to initial expectations, that the bias in the matched-model price index increases with the sampling frequency. The bias is reduced if the high-frequency index is constructed using only long-lived models. These results suggest that models that last for only a brief time are models for which the price/performance ratio has deteriorated very rapidly. Thus increasing the sampling frequency without purging short-lived models actually increases the selection bias.
- Personal computers
- Quality-adjusted consumer price index
ASJC Scopus subject areas
- Statistics and Probability
- Social Sciences (miscellaneous)
- Economics and Econometrics
- Statistics, Probability and Uncertainty