The acquisitions approach measures consumer prices using what households buy during a period instead of trying to spread the value of durable goods across all the periods in which those goods provide services.
Why the approach matters
The definition of consumption is straightforward for groceries or haircuts, but harder for cars, appliances, and other durables. An acquisitions CPI records the transaction when the purchase happens, which makes data collection practical and transparent.
Acquisitions vs service-flow concepts
Economists often distinguish three ideas:
- Acquisitions: use the price paid when the household buys the good.
- Consumption services: estimate the service flow the good delivers each period.
- Payments: focus on when households make cash payments, which matters for credit-financed purchases.
Service-flow concepts can be closer to a cost-of-living ideal, but they require stronger assumptions. The acquisitions approach is easier to implement because it relies on observed market transactions.
A simple CPI representation
[ \text{CPI}t = \sum_i w_i \frac{p{i,t}}{p_{i,0}} ]
Here (w_i) are expenditure weights and (p_{i,t}) is the observed price at time (t). Under an acquisitions approach, the price is tied to when the household actually acquires the item.
Housing is a special case
Owner-occupied housing is often treated differently because a home is both a consumption good and an asset. Many statistical agencies therefore use rental equivalence or user-cost methods for housing instead of a pure acquisitions rule.