Econometric estimates of price indexes for personal computers in the 1990ʹs

In this paper we construct a number of quality-adjusted price indexes for personal computers in the US marketplace over the 1989–1992 time period. We generalize earlier work by incorporating simultaneously the time, age, and vintage effects of computer models and then develop a corresponding specification test procedure. When data on new and surviving models are used in the estimation of hedonic price equations, a variety of quality-adjusted price indexes decline at about 30% per year, with a particularly large price drop occurring in 1992. We conclude that taking quality changes into account has an enormous impact on the time pattern of price indexes for PCʹs.