Quality and Price Setting of High-Tech Goods

Yuriy Gorodnichenko, Oleksandr Talavera (oleksandr.talavera@gmail.com) and Nam Vu

No 14058, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper investigates the link between product quality and price setting for central processing units (CPUs). Using thousands of price quotes from a popular price-comparison website, we find that market fundamentals, such as the number of sellers, median price, share of convenient prices and level of seller stability, are important factors for explaining price stickiness and price dispersion. We demonstrate that calculations of price inflation require conditioning not only on CPU quality, but also on market fundamentals to ensure that CPU attributes are priced correctly. Failing to do so can result in an understatement of CPU price deflation in the sample period.

Keywords: product quality; e-commerce; price setting; hedonic pricing; inflation (search for similar items in EconPapers)
JEL-codes: E31 L11 L81 L86 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2021-01
New Economics Papers: this item is included in nep-com, nep-ind and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - published in: Economic Modelling, 2021, 98, 69 - 85

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Related works:
Journal Article: Quality and price setting of high-tech goods (2021)
Working Paper: Quality and Price Setting of High-Tech Goods (2021)
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