Different methods of adjusting for quality changes are a possible cause of international statistics not being comparable. Therefore the market for personal computers (PC) was chosen in order to establish, whether hedonic methods can be used to create harmonized quality adjusted price indices on a European level. Special emphasis will be placed on determining whether gains can be obtained through economies of scale if Eurostat supplies the hedonic functions to be used in all Member Countries. Personal computers appear to be the obvious choice. Because of the component based architecture with standardized interfaces an international division of labour in the computer industry exists, with only a few global producers for each component. Since these components are traded in a global market, while the PC producers only assemble and distribute them, it is reasonable to assume similar cost functions for all countries. In addition, the dominance of Microsoft products consolidates the requirements concerning the configuration of PCs. Therefore the hypothesis that markets in Europe are sufficiently similar, seems to be adequately justified. Even if this project were to be rejected, estimates based on the same model specifications could be performed with a European database. Therefore one must examine, how the time paths of the "inflationary" component of the price changes for PCs differ by country in detail (i.e. on a monthly, quarterly, and yearly basis), and whether different developments of nominal average prices can be traced to different configurations of the PCs or to differences in the temporal development of prices. The target of this project is therefore to identify the quality characteristics determining the prices for PCs in ten European countries and to compute implicit prices. Special attention will be paid to the influence of the proposed functional connection between quality characteristics and price on the designated quality changes. An important issue which must be addressed is whether the construction of a joint European hedonic price function is feasible. This would facilitate the use of the method and save valuable resources in the Member States. Identical valuations in two large EU countries are an important prerequisite for computing harmonized hedonic price indices on a European level. Therefore it is a further objective of the project to determine whether it is possible to create joint hedonic price indices for Europe. In particular it will be important to establish whether similarities in the valuations of certain quality characteristics by the consumers in the respective countries allow a central and therefore cost effective implementation of quality corrections. Finally, this project is supposed to determine which demands a European database has to meet. In order to do this data which were compiled via the internet in the course of the project will be compared to the findings of a market research institute.
Discussion and Working Papers
Moch, Dietmar, Jörgen Dalén and Paul Konijn (2003), Comparison of Hedonic Functions for PCs Across EU Countries, Discussion Paper, Eurostat.
Moch, Dietmar, Jörgen Dalén and Paul Konijn (2002), Searching for the European Hedonic Function for PCs, Working Paper, Eurostat, Luxembourg.
Moch, Dietmar and Jack Triplett (2001), International Hedonic Price Indexes - A Comparison of PC Prices between France and Germany, mimeo, ZEW Mannheim, Brookings Institution.
01.05.2001 - 31.08.2003
Fred Barzyk, Statistics Canada, Ottawa, Ontario, CA
Richard McKenzie, Statistics Australia, Adelaide, AU
Prof. Jack E. Triplett, The Brookings Institution, Washington D.C., USA