AEA Papers and Proceedings
ISSN 2574-0768 (Print) | ISSN 2574-0776 (Online)
Quality-Adjusted Unit Value Index: Are Changes in Average Prices Inflation or Quality Change?
AEA Papers and Proceedings
(pp. 551–555)
Abstract
The growing availability of digitized item-level transaction data has led to widespread use of the average selling price, called the unit value index (UVI) by researchers, to track price change. Though commonly used by retailers and market analysts as indicators of price trends, the UVI only provides reliable measures of inflation when the goods it covers are truly homogeneous. This paper derives and analyzes a decomposition of the change in the UVI and a quality-adjusted UVI using hedonics. It separates inflation and effects of product heterogeneity and shows that shifts toward higher-quality models explains increasing average prices of notebook computers.Citation
Haltiwanger, John, R. Benjamin Rodriguez, Ron Jarmin, and Matthew D. Shapiro. 2026. "Quality-Adjusted Unit Value Index: Are Changes in Average Prices Inflation or Quality Change?" AEA Papers and Proceedings 116: 551–555. DOI: 10.1257/pandp.20261060Additional Materials
JEL Classification
- D11 Consumer Economics: Theory
- D21 Firm Behavior: Theory
- E31 Price Level; Inflation; Deflation
- L13 Oligopoly and Other Imperfect Markets
- L81 Retail and Wholesale Trade; e-Commerce