Approaches to performance measurement in hedonic analysis: Price indexes for laptop computers in the 1990's

This paper estimates price indexes for laptop personal computers using hedonic methods and data taken from PC Magazine technical reviews. We use benchmark test results to construct a measure of system performance that encapsulates factors that have previously gone unmeasured, such as the interactions between hardware components. The resulting hedonic function is parsimonious yet has good explanatory power. A second approach to performance measurement is developed using a set of technical proxies that are shown to closely approximate the benchmark test scores, and are thus nearly perfectly equivalent in terms of resulting price index estimates. While not as parsimonious as a single performance measure, these proxies have the advantage of not requiring direct performance testing, and could thus be applied to larger data sets. Laptops were found to have declined in quality-adjusted price at an average rate of 40% per year for the period 1990-1998.     

Econometric analysis of price index for home video cassette recorders in the U.S., 1978-1987

This paper conducts an empirical analysis on the U.S. VCR market using a hedonic approach. The paper finds that quality-adjusted price indices decline at 11-12% per year, with a large annual drop of about 18% from 1982-85. Estimation and data analysis reveal interesting aspects of the evolution of quality and price in the VCR market. As a result of the exclusion of the VCR category until 1986, the paper estimates a bias of 2.4% per year in the CPI electronics subindex.     

Functional obsolescence and an extension of hedonic theory

A model is derived that provides a focus on important cases that were intentially ignored by Rosen. This study focuses on bundles of housing characteristics that are no longer produced profitably. These bundles are functionally obsolete. The costs to cure functional obsolescence are assumed to be proportional to the cure with different constants of proportionality for curing deficiencies and excesses. The hedonic functions consistent with arbitrage equilibrium are derived. The special case in which a characteristic must be entirely removed prior to renovation or modernization is considered. The implications of relaxing the assumptions of linear adjustment costs, homogeneous consumers, and a single industry are discussed. Finally, conclusions are drawn related to what this theory suggests about the forms of hedonic functions.     

Demand and cost impacts of the 2 mm technology program in the US motor-vehicle market

We assess the impact on demand and producers’ costs of a new technology implemented in the US auto industry, the 2 mm program. This is a fascinating case partially because of the unique collaboration among public agencies and a consortium of manufacturers and universities. Using a type of hedonic price model for demand, we show that the new technology was responsible for a short-lived increase in demand for vehicles produced by US automakers at increased producers’ costs. Firms that refused to participate in the consortium attained smaller net gains implementing the technology independently. Overall, our approach differs from that of previous analysts in that we (1) separate demand from supply, (2) employ a comprehensive vehicle database, spanning 1981–1998 data, including data on virtually all vehicle models sold in the USA, as well as data on plants’ and producers’ technology characteristics, and (3) rely on sales and production data rather than plant data. Also, we quantify the cost of not participating in the consortium.     

Hedonic markets and sorting equilibria: Bid-function envelopes for public services and neighborhood amenities

Hedonic regressions with house value as the dependent variable are widely used to study public services and neighborhood amenities. This paper builds on the theory of household bidding and sorting across communities to derive bid-function envelopes, which provide a form for these regressions. This approach allows for household heterogeneity and multiple amenities, yields estimates of the price elasticity of amenity demand directly from the hedonic without a Rosen two-step procedure, and provides tests of hypotheses about sorting. An application to Cleveland area data from 2000 yields price elasticities for school quality and neighborhood ethnic composition and supports the sorting hypotheses.     

Olfaction as a cue for product quality

This paper explores the effect of olfaction on product performance judgments. An experiment is conducted to determine (1) the robustness of the olfaction effects observed in early research and (2) the underlying reason why olfaction affects judgments. It appears that cognitions, rather than hedonics, drive the observed olfaction effects.The authors thank Terence A. Shimp and Pam Scholder Ellen for their helpful comments. Thanks also go to Renee Mayhugh and Yukiyo Tanaka for their assistance in collecting data.