Inflation and Quality

by Don Boudreaux on March 24, 2005

in Prices

Suppose a hotel chain, such as Marriott, changes the sheets it uses on its beds from 200-count polyester/cotton mix sheets to 300-count pure cotton sheets. Suppose also that consumers respond positively to this change, allowing the hotel to increase its average per-night rate by $15.

How does this quality-improvement-related price hike factor into official calculations of the rate of inflation? How should it factor in? Virginia Postrel offers a nice discussion in her column in today’s New York Times – which closes with the admission by an economist at the Bureau of Labor Statistics that measuring inflation "is more of an art than a science, unfortunately."

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