Hedonic Quality Adjustment in the CPI

Overview

The CPI is calculated using prices for a fixed basket of goods and services through time. While the basket is periodically revised to reflect changing consumer expenditures, some items being priced in the sample come and go from the marketplace, making collection of these prices from month to month difficult. When an item is no longer available in the marketplace, a similar replacement item is selected. Often there are no similar items from which to choose, and as a result, a less comparable item is selected, potentially introducing quality change and an associated price differential into the index. The hedonic quality adjustment method removes any price differential attributed to a change in quality by adding or subtracting the estimated value of that change from the price of the old item.

More information on hedonic quality adjustment may be found on our page containing responses to frequently asked questions.

CPI Item Categories that Utilize Hedonic Quality Adjustments

Item Relative Importance December 2013
Men’s Suits, Sport Coats and Outerwear (PDF) 0.113
Men’s Shirts and Sweaters (PDF) 0.207
Men’s Pants and Shorts (PDF) 0.160
Boys’ Apparel (PDF) 0.188
Women’s Outerwear (PDF) 0.114
Women's Dresses (PDF) 0.154
Women's Suits and Separates (PDF) 0.604
Girls' Apparel (PDF) 0.204
Men’s Footwear (PDF) 0.216
Boys' and Girls' Footwear (PDF) 0.169
Women’s Footwear (PDF) 0.326
Educational Books and Supplies (PDF) 0.195
Major Appliances (PDF) 0.159
Televisions (PDF) 0.161
Other Video Equipment (PDF) 0.030
Rent of Primary Residence 6.977
Owners' Equivalent Rent of Primary Residence 22.505

 

Hedonic quality adjustments for rent and owners’ equivalent rent are used primarily to adjust for the age of a rental unit, and for utility adjustments. Information on age bias adjustments for shelter can be found at “Updating the Housing Age-Bias Regression Model in the CPI,” at (PDF). Information on shelter utility quality adjustments can be found at “How the CPI measures price change for Owner’s equivalent rent of primary residence (OER) and Rent of primary residence (Rent),” at PDF. Additional information on both age bias and utility quality adjustments can be found at "Updating the rent sample for the CPI Housing Survey".

Publications, Research and Other Documentation

  • BLS Hedonic Research (PDF)
  • BLS Handbook of Methods, Chapter 17, The Consumer Price Index, Pages 22-23 (HTML) (PDF)
  • Non-BLS Hedonic Research (PDF)

 

Last Modified Date: October 23, 2014