A New Method for Calculating Consumer Price Indices: Incorporating Consumer Perceptions and Attitudes with Item Response Theory

Abstract

This paper presents a conceptual approach to improve consumer price indices (CPI) by incorporating consumers' perceptions and attitudes towards pricing. The proposed approach uses item response theory (IRT) and aims to overcome the limitations of existing CPI methods. The paper provides a comprehensive literature review of existing CPI methods and discusses their potential advantages and limitations. The methodology covers survey design, data collection and data analysis, with a focus on IRT theory and methodology. This approach has the potential to improve the accuracy of CPIs by incorporating consumers' perceptions and attitudes towards pricing. However, the paper also acknowledges potential limitations, including the need for a representative sample and the complexity of the IRT model. Overall, this conceptual paper contributes to the literature on CPIs by proposing a new approach that addresses the limitations of existing methods and has the potential to provide more accurate measures of inflation. The ideas presented in this paper could serve as a basis for future research and inform the development of new CPI methods.