Hedonic adjustment3/17/2023 ![]() The “quantity adjustment” method is applicable to products for which the replacement product is of a different size to the previously available one. However, it should be used with caution as it is possible for new production techniques to reduce costs while simultaneously improving quality.Ħ. This approach is most practicable in markets with a relatively small number of producers, with infrequent and predictable model updates. The “differences in production costs” approach relies on the information provided by the manufacturers on the production costs of new features of the replacements (new models), to which retail mark-ups and associated indirect taxes are then added. None, some, or all of the price difference may be attributed to the improved quality.ĥ. The “expert’s adjustment” method relies on the judgment of one or more industry experts, commodity specialists, price statisticians or price collectors on the value of any quality difference between the old and replacement product. Rather than using the average index change for all the non-missing products in the aggregate, the imputed rate of price change is estimated using only those price changes of the products that were judged essentially equivalent or were directly qualityadjusted.Ĥ. The only difference is in the source of the imputed rate of price change to period t 1 for the disappearing product. The “class mean imputation” method is a variant of the “overall mean imputation” method. It assumes that the pure price difference between the disappearing product and its replacement is equal to the average price changes for continuing (non-missing) products. The “overall mean imputation” method first calculates the average price change for an aggregate without the disappearing product and its replacement, and then uses that rate of price change to impute a price change for the disappearing product. The “overlap” method assumes that the entire price difference at a common point of time between the disappearing product and its replacement is due to a difference in quality. Here are all the ‘adjustments’ they can do. So without reading the 163-page document, I am going to assume that they have the tools at their disposal to make inflation numbers good in whatever circumstances. If they are ever questioned they can point to some dreary document and say that they have ‘clearly’ mentioned everything. So no one actually reads them so they can do want they want to do. To be linguistically precise so that it cannot be misinterpreted. I generally work with the theory that government and legal documents (also many company reports) are written in the manner they are written, Then I searched ‘quality adjustment’ and got many matches. It came under ‘Quality Adjustment methods’. It’s a 163-page document and I didn’t want to go through it so searched for ‘hedonic’ and got a single hit on page 155 (the digital page number of PDF. I found this 2010 manual (PDF) on CPI from the Ministry of Statistics and Programme Implementation. So I tried to find the actual methodology in calculating CPI in India. In India we don’t do hedonic adjustments (I think) and I hope we never will. The inflation calculation, and thus, the GDP calculation is broken (in the US). It was discussing hedonic adjustment and the author, Deepak Shenoy, mentioning this. I tried the second link (capitalmind.in) since others had 'real estate' in the title. I tried googling it "hedonic adjustment India". I was interested in knowing if that is practiced in CPI calculations for India. I would not say hedonism plays a part in going for the 40 MP camera as it is the most basic one available. That is the basic idea behind hedonic adjustment. The price is the same ₹1,000 per megapixel. The quality of the product doubled from 20 MP to 40 MP and the price doubled. When inflation is calculated with hedonic adjustment it is zero. Today 20-megapixel cameras are not available in the market anymore, the starting size of sensors is 40 megapixels. Let us assume that a camera that had a 20-megapixel sensor was priced at ₹20,000 5 years ago. Let me give a crude example so you don’t have to go through the complete article. I recently read this article from Epsilon theory on hedonic adjustment.
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