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Federal Reserve Bank of Boston
Working Papers
A concise test of rational consumer search
Chloe Lee
Maria Jose Luengo-Prado
Bent E. Sorensen
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.


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Chloe Lee & Maria Jose Luengo-Prado & Bent E. Sorensen, A concise test of rational consumer search, Federal Reserve Bank of Boston, Working Papers 18-4, 18 Jun 2018.
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Keywords: consumption; consumer search; time use
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