This PDF is a selection from a published volume from the National Bureau of Economic Research. Volume Title: Scanner Data and Price Indexes

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1 This PDF is a selection from a published volume from the National Bureau of Economic Research Volume Title: Scanner Data and Price Indexes Volume Author/Editor: Robert C. Feenstra and Matthew D. Shapiro, editors Volume Publisher: University of Chicago Press Volume ISBN: Volume URL: Conference Date: September 15-16, 2000 Publication Date: January 2003 Title: Front matter, Scanner Data and Price Indexes Author: Robert C. Feenstra, Matthew D. Shapiro URL:

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3 Scanner Data and Price Indexes

4 Studies in Income and Wealth Volume 64 National Bureau of Economic Research Conference on Research in Income and Wealth

5 Scanner Data and Price Indexes Edited by Robert C. Feenstra and Matthew D. Shapiro The University of Chicago Press Chicago and London

6 ROBERT C. FEENSTRA is professor of economics at the University of California, Davis, and a research associate of the National Bureau of Economic Research. MATTHEW D. SHAPIRO is professor of economics at the University of Michigan and a research associate of the National Bureau of Economic Research. The University of Chicago Press, Chicago The University of Chicago Press, Ltd., London 2003 by the National Bureau of Economic Research All rights reserved. Published 2003 Printed in the United States of America ISBN: (cloth) Copyright is not claimed for chapter 2 by David H. Richardson; Comment by Dennis Fixler in the Roundtable Discussion; Comment by John S. Greenlees in the Roundtable Discussion; Comment on chapter 5 by Marshall B. Reinsdorf. Library of Congress Cataloging-in-Publication Data Scanner data and price indexes / edited by Robert C. Feenstra and Matthew D. Shapiro. p. cm. (Studies in income and wealth ; v. 64) Includes bibliographical references and index. ISBN (cloth) ISBN (electronic) 1. Consumer price indexes Data processing. 2. Consumer price indexes Methodology. 3. Price indexes Data processing. 4. Price indexes Methodology. 5. Prices Data processing. 6. Prices Statistical methods. 7. Point-of-sale systems. 8. Scanning systems. I. Feenstra, Robert C. II. Shapiro, Matthew D. (Matthew David) III. Series. HC106.3.C714 vol. 64 [HB225] 330 s dc21 [338.5'28' ] o The paper used in this publication meets the minimum requirements of the American National Standard for Information Sciences Permanence of Paper for Printed Library Materials, ANSI Z

7 National Bureau of Economic Research Officers Carl F. Christ, chairman Michael H. Moskow, vice-chairman Martin Feldstein, president and chief executive officer Susan Colligan, vice president for administration and budget and corporate secretary Robert Mednick, treasurer Kelly Horak, controller and assistant corporate secretary Gerardine Johnson, assistant corporate secretary Directors at Large Peter C. Aldrich Martin Feldstein Alicia H. Munnell Elizabeth E. Bailey Stephen Friedman Rudolph A. Oswald John H. Biggs Judith M. Gueron Robert T. Parry Andrew Brimmer George Hatsopoulos Peter G. Peterson Carl F. Christ Karen N. Horn Richard N. Rosett John S. Clarkeson Judy C. Lewent Kathleen P. Utgoff Don R. Conlan John Lipsky Marina v. N. Whitman George C. Eads Michael H. Moskow Martin B. Zimmerman Directors by University Appointment George Akerlof, California, Berkeley Jagdish Bhagwati, Columbia William C. Brainard, Yale Glen G. Cain, Wisconsin Franklin Fisher, Massachusetts Institute of Technology Saul H. Hymans, Michigan Marjorie B. McElroy, Duke Joel Mokyr, Northwestern Michael J. Brennan, California, Los Angeles Andrew Postlewaite, Pennsylvania Nathan Rosenberg, Stanford Michael Rothschild, Princeton Craig Swan, Minnesota David B. Yoffie, Harvard Arnold Zellner, Chicago Directors by Appointment of Other Organizations Mark Drabenstott, American Agricultural Richard D. Rippe, National Association for Economics Association Business Economics Gail D. Fosler, The Conference Board John J. Siegfried, American Economic A. Ronald Gallant, American Statistical Association Association David A. Smith, American Federation of Robert S. Hamada, American Finance Labor and Congress of Industrial Association Organizations Robert Mednick, American Institute of Josh S. Weston, Committee for Economic Certified Public Accountants Development Angelo Melino, Canadian Economics Gavin Wright, Economic History Association Association Directors Emeriti Thomas D. Flynn Franklin A. Lindsay Bert Seidman Lawrence R. Klein Paul W. McCracken Eli Shapiro Since this volume is a record of conference proceedings, it has been exempted from the rules governing critical review of manuscripts by the Board of Directors of the National Bureau (resolution adopted 8 June 1948, as revised 21 November 1949 and 20 April 1968).

8 elation of the Directors to the Work and Publications of the National Bureau of Economic Research 1. The object of the National Bureau of Economic Research is to ascertain and to present to the public important economic facts and their interpretation in a scientific and impartial manner. The Board of Directors is charged with the responsibility of ensuring that the work of the National Bureau is carried on in strict conformity with this object. 2. The President of the National Bureau shall submit to the Board of Directors, or to its Executive Committee, for their formal adoption all specific proposals for research to be instituted. 3. No research report shall be published by the National Bureau until the President has sent each member of the Board a notice that a manuscript is recommended for publication and that in the President s opinion it is suitable for publication in accordance with the principles of the National Bureau. Such notification will include an abstract or summary of the manuscript s content and a response form for use by those Directors who desire a copy of the manuscript for review. Each manuscript shall contain a summary drawing attention to the nature and treatment of the problem studied, the character of the data and their utilization in the report, and the main conclusions reached. 4. For each manuscript so submitted, a special committee of the Directors (including Directors Emeriti) shall be appointed by majority agreement of the President and Vice Presidents (or by the Executive Committee in case of inability to decide on the part of the President and Vice Presidents), consisting of three Directors selected as nearly as may be one from each general division of the Board. The names of the special manuscript committee shall be stated to each Director when notice of the proposed publication is submitted to him. It shall be the duty of each member of the special manuscript committee to read the manuscript. If each member of the manuscript committee signifies his approval within thirty days of the transmittal of the manuscript, the report may be published. If at the end of that period any member of the manuscript committee withholds his approval, the President shall then notify each member of the Board, requesting approval or disapproval of publication, and thirty days additional shall be granted for this purpose. The manuscript shall then not be published unless at least a majority of the entire Board who shall have voted on the proposal within the time fixed for the receipt of votes shall have approved. 5. No manuscript may be published, though approved by each member of the special manuscript committee, until forty-five days have elapsed from the transmittal of the report in manuscript form. The interval is allowed for the receipt of any memorandum of dissent or reservation, together with a brief statement of his reasons, that any member may wish to express; and such memorandum of dissent or reservation shall be published with the manuscript if he so desires. Publication does not, however, imply that each member of the Board has read the manuscript, or that either members of the Board in general or the special committee have passed on its validity in every detail. 6. Publications of the National Bureau issued for informational purposes concerning the work of the Bureau and its staff, or issued to inform the public of activities of Bureau staff, and volumes issued as a result of various conferences involving the National Bureau shall contain a specific disclaimer noting that such publication has not passed through the normal review procedures required in this resolution. The Executive Committee of the Board is charged with review of all such publications from time to time to ensure that they do not take on the character of formal research reports of the National Bureau, requiring formal Board approval. 7. Unless otherwise determined by the Board or exempted by the terms of paragraph 6, a copy of this resolution shall be printed in each National Bureau publication. (Resolution adopted October 25, 1926, as revised through September 30, 1974)

9 Contents Prefatory Note xi Introduction 1 Robert C. Feenstra and Matthew D. Shapiro I. SCANNER DATA IN OFFICIAL STATISTICS: ADVANCING THE STATE OF THE ART 1. Using Scanner Data to Improve the Quality of Measurement in the Consumer Price Index 17 William J. Hawkes and Frank W. Piotrowski 2. Scanner Indexes for the Consumer Price Index 39 David H. Richardson 3. Price Collection and Quality Assurance of Item Sampling in the Retail Prices Index: How Can Scanner Data Help? 67 David Fenwick, Adrian Ball, Peter Morgan, and Mick Silver 4. Estimating Price Movements for Consumer Durables Using Electronic Retail Transactions Data 89 Robin Lowe and Candace Ruscher Roundtable Discussion 111 Dennis Fixler, John S. Greenlees, David Fenwick, Robin Lowe, and Mick Silver vii

10 viii Contents II. AGGREGATION across TIME 5. High-Frequency Substitution and the Measurement of Price Indexes 123 Robert C. Feenstra and Matthew D. Shapiro Comment: Marshall B. Reinsdorf 6. Using Scanner Data in Consumer Price Indexes: Some Neglected Conceptual Considerations 151 Jack E. Triplett III. USING PRICE DATA TO STUDY MARKET STRUCTURE 7. What Can the Price Gap between Branded and Private-Label Products Tell Us about Markups? 165 Robert Barsky, Mark Bergen, Shantanu Dutta, and Daniel Levy Comment: Julio Rotemberg 8. The Long Shadow of Patent Expiration: Generic Entry and Rx-to-OTC Switches 229 Ernst R. Berndt, Margaret K. Kyle, and Davina C. Ling Comment: Steve Morgan IV. MEASURING CHANGE IN QUALITY AND IMPUTING MISSING OBSERVATIONS 9. The Measurement of Quality-Adjusted Price Changes 277 Mick Silver and Saeed Heravi 10. Hedonic Regressions: A Consumer Theory Approach 317 Erwin Diewert 11. Price Index Estimation Using Price Imputation for Unsold Items 349 Ralph Bradley Comment: Eduardo Ley Contributors 383 Author Index 385 Subject Index 389

11 Prefatory Note This volume contains revised versions of most of the papers and discussion presented at the Conference on Research in Income and Wealth entitled Scanner Data and Price Indexes, held in Arlington, Virginia, on September Funds for the Conference on Research in Income and Wealth are supplied by the Bureau of Labor Statistics, the Bureau of Economic Analysis, the Federal Reserve Board, and the Bureau of the Census; we are indebted to them for their support. We thank Robert C. Feenstra and Matthew D. Shapiro, who served as conference organizers and editors of the volume, and the NBER staff and NBER and UCP editors for their assistance in organizing the conference and editing the volume. CRIW Executive Committee Membership Spring 2002 John M. Abowd, Cornell University Susanto Basu, University of Michigan Ernst R. Berndt, Sloan School of Management Carol A. Corrado, Board of Governors of the Federal Reserve Robert C. Feenstra, UC Davis John Greenlees, Bureau of Labor Statistics John C. Haltiwanger, University of Maryland Michael J. Harper, Bureau of Labor Statistics Charles R. Hulten (chair), University of Maryland John Bradford Jensen, Bureau of the Census ix

12 x Prefatory Note Lawrence Katz, Harvard University J. Steven Landefeld, Bureau of Economic Analysis Brent Moulton, Bureau of Economic Analysis Mark J. Roberts, Pennsylvania State University Matthew D. Shapiro, University of Michigan David W. Wilcox, Board of Governors of the Federal Reserve NBER Appointees Volume Editors Acknowledgments We are grateful to ACNielsen for providing data for some of the papers. We also thank Bill Hawkes for his longstanding support for the use of scanner data in research.