Quality Adjustment

Categories: Economics,

The process - or the result of the process - of estimating what the market price of a replacement product would be if it had the characteristics of the product it replaces and with whose price its price is to be compared. The process requires estimating the market value of any differences in the price-determining characteristics of the two products and adjusting - by addition, subtraction or multiplication by a coefficient - the observed price of the replacement product. The adjustment is made in order that the price comparison between the two products reflects pure price change only.