How does the hedonic method estimate the value of quality change?
CPI data collectors obtain the price and a full description of each item in the CPI sample. In those item categories where the CPI uses the hedonic method, BLS economists use a statistical technique called regression modeling to estimate a value for each characteristic; these values sum to the price of the item. For instance, in the mens shirts hedonic model, sleeve length is an estimated characteristic. The estimate for long sleeves is interpreted as the portion of the shirts price that can be attributed to the presence of long sleeves. Hedonic models are estimated about every two years to capture new innovations in the marketplace, or to reflect changes to the value estimates of existing characteristics.
