CPI Bias from Supercenters: Does the BLS Know That Wal-Mart Exists?

Edited by Jerry Hausman and Ephraim Leibtag

in Price Index Concepts and Measurement

Published by University of Chicago Press

Published in print February 2010 | ISBN: 9780226148557
Published online February 2013 | e-ISBN: 9780226148571 | DOI:
CPI Bias from Supercenters: Does the BLS Know That Wal-Mart Exists?

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This chapter focuses on the fact that the Consumer Price Index (CPI) does not compare the prices charged for the same items at different outlets. It describes how the Bureau of Labor Statistics assumes that any price differences can be explained by differences in outlet characteristics valued by consumers, such as locational convenience or customer service. This may result in the failure to incorporate the gains to consumers from the continuing growth in sales at Wal-Mart and other low-price, high-volume superstores. The authors employ the A.C. Nielsen Homescan consumer panel data to identify the price differentials for twenty food product categories between supercenters, mass merchandisers, and club stores (SMCs) and other outlets. These differentials, combined with the SMCs' increasing market share, lead the authors to conclude that CPI food at home inflation is too high by about 0.32–0.42 percentage points annually.

Keywords: Consumer Price Index; CPI; Labor Statistics; customer service; A.C. Nielsen; inflation

Chapter.  14335 words.  Illustrated.

Subjects: Econometrics and Mathematical Economics

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