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.
Haltiwanger et al. (Fri,) studied this question.