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.
Context: In a CPI context, the adjustment is needed when the price of a replacement product has to be compared with the price of the product it replaces. In practice, the required adjustment can only be estimated. Different methods of estimation, including hedonic methods, may be used in different circumstances.