Escalator clauses replace price letters with a formula: new price = base price × (1 + share × (index now ÷ base index − 1)), usually with a band so small moves don't trigger changes.
They work best when the index tracks the supplier's main cost; for new wood pallets, the BLS wood pallet PPI is a common choice.
See also
- Producer price index (PPI)
- A U.S. Bureau of Labor Statistics measure of the change over time in prices domestic producers receive.
- Base period
- The reference period whose index value is set to 100.
- Cost per trip (CPT)
- The total cost of using a pallet for one shipment, including everything beyond its price.