Econometric Analysis of Price Index for Home Video Cassette Recorders in the U.S., 1978-87

Abstract

This paper conducts an empirical analysis on the U.S. VCR market using a hedonic approach. The paper finds that quality-adjusted price indexes decline at 11-12% per year, with a large annual drop of about 18% from 1982-85. Estimation and data analysis reveal interesting aspects of the evolution of quality and price in the VCR market. Finally the paper estimates a bias of 2.4% per year in the CPI electronics subindex due to the missing category of VCR until 1986.

Keywords: Home video cassette recorders; Price index; Hedonics; CPI; New products

JEL Classification: C23, C43, L68