Store expensiveness and consumer saving: Insights from a new decomposition of price dispersion

Sofronis Clerides, Pascal Courty and Yupei Ma ()
Additional contact information
Yupei Ma: University of British Columbia

Quantitative Marketing and Economics (QME), 2023, vol. 21, issue 1, No 2, 65-94

Abstract: Abstract We build on recent work that analyzes consumers’ ability to save by exploiting price dispersion in grocery stores. We show that store expensiveness varies across consumers depending on the basket they consume, meaning that consumers can save more by shopping at a store that is cheaper for their basket rather than at a store that is cheaper overall. We incorporate this insight into a new price variance decomposition that is a refinement of existing approaches. Our results show that the ability to buy products from the store where they are cheapest is much less important than previous work had found; rather, the ability to choose the cheapest stores for one’s basket is a more important source of variation in the prices consumers pay. Our approach also provides an informal test for competing theories modeling consumers as either shopping for products or shopping for categories, and finds support for both. We conclude that the idea of consumers choosing the right store for their basket has substantial traction and is a useful addition to our arsenal of models of consumer search behavior.

Keywords: Price dispersion; Grocery shopping; Consumer saving; Store expensiveness; Consumer basket (search for similar items in EconPapers)
JEL-codes: D12 D14 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11129-022-09258-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: Store expensiveness and consumer saving: Insights from a new decomposition of price dispersion (2020)
Working Paper: Store expensiveness and consumer saving: Insights from a new decomposition of price dispersion (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:qmktec:v:21:y:2023:i:1:d:10.1007_s11129-022-09258-1

Ordering information: This journal article can be ordered from
http://www.springer. ... ng/journal/11129/PS2

DOI: 10.1007/s11129-022-09258-1

Access Statistics for this article

Quantitative Marketing and Economics (QME) is currently edited by Pradeep Chintagunta

More articles in Quantitative Marketing and Economics (QME) from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().