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December 1993

Quality adjustment of price indexes

Mary Kokoski

Hedonic analysis may provide a viable alternative to other methods currently used to net out the effects of quality change in items in the CPI market basket, so that the desired measure of pure price change is obtained. This article addresses the problem of quality change in the CPI, with particular emphasis on the empirical technique of hedonic regression as a method of measuring the value of quality differences in goods and services.

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