In the HICP, therefore, we turn to a uniform threshold value: if the share of a new product exceeds 0.1 per cent of total expenditure, this product should be included in the price index. It is true that this method fails to capture the increase in consumer surplus generated by a new product and early price decreases.
However, I see no other way to solve this problem. Incidentally, the remaining measurement bias is not likely to be very large, since fundamental product innovations tend to be rare. All in all the just mentioned 0.1 per cent provision seems to be adequate. The major problem of new product variants, and thus of adjusting for quality differences when replacing obsolete items remains.