Dumagan, Jesus C.; Mount, Timothy D. - 1997
The U.S. CPI is based on the Laspeyres price index, an index type that has an upward "substitution bias." Thus, the CPI … tends to overstate increases in the cost of living. To address this bias, the Advisory Commission to Study the Consumer … preferences. Under more realistic non-homothetic preferences, expenditure shares vary with income and, thus, "income bias" is …