Using Hedonic Methods for Quality Adjustment in the Cpi:the Consumer Audio Products Component

There has been strong recommendation that the BLS explore the use of hedonic methods forquality adjustment in the Consumer Price Index (CPI) for decades. The Price Statistics ReviewCommittee (the Stigler Commission Report) in 1961 expressed the view that hedonic analysis would provide a ?more objective? approach to addressing quality change than the BLS standard methods of dealing with this issue (Triplett (1990)). More recently, the Advisory Commission to Study theConsumer Price Index (the Boskin Commission Report, 1996) reiterated this recommendation,recognizing that accurate measures of quality change will enable a more accurate measure of pure price,or ?cost-of-living? change. Categories of goods and services where quality changes are frequent andrelatively easy to identify are the best candidates for using hedonic methods, given that data can beacquired.