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At What Price?: Conceptualizing and Measuring Cost-of-Living and Price Indexes
The Commodities and Services Survey: Outlet Pricing
The number of price quotes that are collected is determined at the ELI and index-area level in a process called sample allocation. The stated objective of sample allocation is to produce the most accurate national-level all-item index possible, given the budget constraints. Through this process, item strata in each area are assigned a minimum number of price observations. In practice, this means that sampling rates are dictated, and will be higher, for ELIs that represent a large expenditure weight or display high price variability, as is the case with such items as apples and bananas (Lane, 1996).
The CPI’s C&S is a longitudinal survey that tracks changes in price quotes for most CPI-sampled consumer items over time.7 A few price quotes come from other sources: for instance, the CPI housing survey performs the same function for the shelter category. As described in Chapter 5, the specific items for which (and outlets from which) the C&S samples price quotes are rotated simultaneously. The POPS provides the sampling frames for outlets by producing estimates of expenditures for items in specific POPS categories (corresponding roughly with strata) at specific outlets. Based on POPS results, specific ELIs are assigned to each sample outlet. Each ELI has a checklist of product specifications so that a BLS field agent can identify specific items from the ELI category that are sold at the selected sample outlet. Field agents select a unique item (from within the preselected ELI category) for pricing based on a probability distribution of sales, with high-expenditure items (within that outlet) being more likely to be selected than low-expenditure items. The process whereby an agent narrows down the list of potential items from the ELI group to a specific item is called disaggregation (see Lane, 2000:9, for details). After a unique item is selected, the agent returns to the same outlet every month (or, in some cases, every 2 months) to record the price change. This process is repeated as long as the outlet continues to sell the item or until the outlet is rotated out of the sample. If the item is permanently discontinued, the agent consults a “characteristics” checklist and determines the most comparable replacement to price.
As discussed elsewhere in the report, problems may arise with this pricing system—for instance, if an item is first priced when it is on a special sale or when a specific item remains on store shelves long after a large reduction in its market share. BLS continues to explore methods for improving the quality of price data. The most visible experimental activities involve expanding the use of electronic data, which may offer such advantages as larger samples, reduced variances, more accurate determination of in-store sales shares, more timely publication of superlative indexes, and the potential to use unit pricing.
This paragraph summarizes the description of the C&S survey from Lane (2000).