Dynamic Cost of Living Index for Storable Goods

Consumers hold inventory for future uses. This study investigates how such
intertemporal decisions influence the cost-of-living index (COLI). To this end, I construct
a simple dynamic model, in which goods are storable and nonresalable, and prices take
either high (regular price) or low values (sales). I then introduce two types of dynamic
COLIs. Simulation results show that neither index satisfies both monotonicity and the
time reversal test.