INTERNETRISING,PRICESFALLING 7 Figure2: CumulativeInflation,DPIvs. CPI. 102 102 100 100 CPI 98 98 x Inde96 96 94 DPI 94 92 92 Jan−14 Jul−14 Jan−15 Jul−15 Jan−16 Jul−16 Jan−17 Jul−17 Notes: For the 65 ELIs covered by the Adobe Digital Price Index (DPI). Uses CPI relative importance weights for each ELI. Source: Authors’ calculations usingAdobeAnalyticsandBLSdata. wecanruleoutthatdifferencesbetweenthetwoindexesarisefromcategories whicharenotcoveredbytheDPIortheweightingofcategoriescovered. WeplotthetwoindicestogetherinFigure2. TheDPIexhibitsnotablymore deflation over the period than the CPI for the same categories, ending up 4% lowerbytheendofthesample.Table2showstheaverageannualinflationrates from 2014–2017. Overall (headline) DPI inflation is 1.3 percentage points per yearlowerthanCPIinflationfortheequivalentproducts. BreakingoutbyMajor Groups,inflationislowerintheDPIthanintheCPIineverycategoryotherthan medicine&medicalsupplies. Now, excess deflation in high frequency, chain-weighted price indices can result from oscillating prices due to recurring discounts. This phenomenon is knownas“chaindrift.” Evenif the prices and quantities revert to their starting levels, a chained price index may not revert to 1. This has been documented in grocerystorescannerdatabyIvancic,DiewertandFox(2011)anddeHaanand VanderGrient(2011).