This paper examines the appropriate treatment in the cost-of-living index of the
appearance of new varieties of old goods. Existing theory here applies to individual
households. Thus, we first show in what sense Laspeyres and Paasche indices for groups
of households can be considered approximations to theoretically desirable group indices
and then go on to the case of new goods. We apply our results to the case of the
introduction of generics in pharmaceuticals and show that proper treatment can make
a considerable difference.