Traditional price adjustment methods as effective as hedonic regressions, study finds.
Quality adjustment of price indexes is crucial for economic analysis. Hedonic methods are commonly used, but traditional matching models are still popular. Research shows that hedonic regressions and matched models yield similar results when models are frequently updated. The difference in average price changes between the two methods is mainly due to the sum of regression residuals from disappearing and new models. Including indicators of model novelty and oldness in hedonic regressions can make them equivalent to traditional methods. This raises questions about the effectiveness of hedonic methods in quality adjustment for consumer prices in European countries.