Effects of Quality Changes on the Price Index: A Hedonic Approach to the Estimation of a Quality Adjusted Price Index for Personal Computers in Japan (BOJ Monetary and Economic Studies vol. 13, no. 1, Institute for Monetary and Economic Studies, Bank of Japan, July 1995） Japanese Version
This paper studies the effects of quality changes on Japan's price index by estimating a quality adjusted price index (hdeonic price index) for discounted PCs during 1990-94. According to the result, quality adjusted prices for PCs in Japan have declined at an annual rate of 20-25 percent since 1990, reducing consumer durable CPI by 0.2 percentage points per annum and overall CPI by 0.01 percentage points. As consumer durables are apt to be affected by constant quality improvements, this result suggests that the conventional price index for consumer durables is likely to have substantially underestimated real declines in prices.