Taste and Quality Change in the Pure Theory of the True Cost-of-Living Index

The standard theory of the true cost-of-living index gives a rather uncomfortable treatment to taste and quality changes (including the introduction of new goods). The consumer is assumed to have always had an unchanging indifference map, complete with axes for all new goods of whose potential existence he in fact was not aware before their introduction. Similarly, quality change is treated either as an introduction of a new good or as a simple repackaging of an old one equivalent to a price reduction. ¹ Yet the justification for the latter procedure has never been satisfactorily set forth, while the former one meets with many of the same difficulties as does the treatment of new goods itself.