An example of the outlet substitution bias in the calculation of the CPI is a price increase in

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The price difference between buying textbooks through the campus bookstore and buying them through Craigslist is an example of outlet substitution bias. The CPI assumes that consumers will always choose to purchase goods from the same outlet, even if prices change significantly. However, in reality, consumers may switch to alternative outlets (such as Craigslist) to buy the same product at a lower price. This bias can lead to an overestimate of inflation if consumers substitute to lower-priced alternatives, but the CPI does not account for this substitution.

An Example of the Outlet Substitution Bias in the Calculation