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Selective bargain hunting: A concise test of rational consumer search

Chloe Lee, Wen Long, María J. Luengo‐Prado and Bent Sorensen
Authors registered in the RePEc Author Service: Maria Jose Luengo-Prado ()

Economic Inquiry, 2021, vol. 59, issue 3, 1089-1105

Abstract: A model of time‐allocation among work, leisure, and price‐search predicts that rational consumers pay relatively low prices for their preferred goods. Using scanner data, we confirm empirically the implication that consumers find better prices for items (defined by scanner codes, such as a 12‐pack of Pepsi) within categories (such as carbonated drinks) of which they consume relatively more. This provides direct evidence that consumers face constraints on time and/or attention, and that they rationally allocate these scarce resources to optimize welfare.

Date: 2021
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Handle: RePEc:bla:ecinqu:v:59:y:2021:i:3:p:1089-1105