New study reveals how quality affects prices of personal computers.
The article compares different methods for measuring quality-adjusted price indexes in the context of product differentiation. By analyzing how prices are determined by firms, the researchers found that hedonic price indexes provide a range of quality-adjusted price changes, with Laspeyres index as a lower bound and Paasche index as an upper bound. These findings were compared with matched model indexes, and the study focused on personal computer prices in Italy from 1995 to 2000.