, Volume 39, Issue 1, pp 47-59
Date: 08 Feb 2012

Seasonality, consumer heterogeneity and price indexes: the case of prepackaged software

Abstract

This paper measures constant-quality price change for prepackaged software in the US using detailed and comprehensive scanner data. Because there is a large sales surge over the winter-holiday, it is important to account for seasonal variation. Using a novel approach to constructing a seasonally-adjusted cost-of-living price index that explicitly accounts for consumer heterogeneity, I find that from 1997 to 2003 constant-quality software prices declined at an average 15.9% at an annual rate. As a point of comparison, the Bureau of Labor Statistics reports average annual price declines of only 7.7% for prepackaged software.

I would like to thank Ana Aizcorbe, Dennis Fixler and Marshall Reinsdorf for helpful comments. I also thank Andrew Miller for substantive help as a research assistant. The views expressed herein are my own and not necessarily those of the Federal Reserve Bank of New York or the Federal Reserve System.