Market Basket

Host Country – At major locations, goods and services are priced on a periodic basis by carefully selected agents, employed by cost-of-living consulting firms, who are familiar with expatriate spending patterns and shopping areas. These agents may be expatriates themselves who reside in the city they price and provide individual price quotations of the market basket items. (These items generally exclude housing, taxes and transportation.) The consulting firm should ensure that each item or service is defined in detail with regard to quality, weight, volume, size and other factors in order to facilitate the matching of similar items. Stores used for the pricings are selected through surveys of expatriates in all locations. Prices for each item are then arranged, and a price ratio between the average price in the overseas location and the price of the comparable item in the home country is established. The price ratios are grouped and weighted to arrive at an overall index. Home Country – An international assignment consulting firm determines an urban average which measures the cost of goods and services in the employee’s home country and is referred to as the “home country market basket.” This market basket is universal, which means that the same types of consumer items are surveyed worldwide. The sampling represents items consumed by corporate employees throughout the world, generally excluding the items of housing, taxes and transportation (which may be measured and weighted separately). These pricings serve as one benchmark against which the host country costs will be measured.