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Preference changes and index number theory

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  • Thu Huyen Le
  • Kam Yu

Abstract

The economic approach to the cost of living index assumes that consumer preferences remain constant over time. This assumption poses little risk in calculating a short‐run intertemporal bilateral price index. The assumption, however, breaks down in the case of a fixed‐based time series index spanning a long period and in the context of international comparison. The economic analysis of preference changes, however, is not well‐established. In this paper, we review the economic approach in index numbers under preference changes. Suggestions are made on how to approach the problem and their implications for the measurement of price and quantity indices.

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  • Thu Huyen Le & Kam Yu, 2025. "Preference changes and index number theory," Journal of Economic Surveys, Wiley Blackwell, vol. 39(4), pages 1361-1394, September.
    • Handle: RePEc:bla:jecsur:v:39:y:2025:i:4:p:1361-1394
    DOI: 10.1111/joes.12658
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