A concise test of rational consumer search

Hee Yoon Lee, Maria Luengo-Prado and Bent Sorensen

No 18-4, Working Papers from Federal Reserve Bank of Boston

Abstract: A simple model of time allocation between work and price-search predicts that consumers spend relatively more time searching for better prices for goods of which they consume relatively more. Using scanner data, we confirm empirically that consumers pay lower (higher) prices for goods that they buy more (less) of than other consumers. Our results are conservative, because we compare goods that are defined as narrowly as possible by UPC codes, and provide a lower bound for the savings obtained from bargain hunting.

Keywords: consumption; consumer search; time use (search for similar items in EconPapers)
JEL-codes: D12 E21 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2018-06-18
New Economics Papers: this item is included in nep-com and nep-mac
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