The Rise in Household Spending Concentration

51 Pages Posted: 10 Mar 2018 Last revised: 12 May 2018

See all articles by Brent Neiman

Brent Neiman

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Joseph Vavra

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Date Written: May 7, 2018

Abstract

Household consumption bundles look increasingly different from each other. Using detailed scanner data from 2004-2015, we document that households are concentrating more and more spending on their preferred products. These products, however, are not "superstars" that are purchased by everyone. Rather, household purchases are increasingly idiosyncratic. As a result, aggregate product concentration has actually declined even as product concentration within households has risen. This trend is pervasive across geographic locations and product categories and even holds within demographic and income groups. The growth in household concentration is associated with households purchasing new and dropping old products and is most rapid in retail chains that introduce the most new products. Further, those households with more concentrated product spending pay more for the products they purchase. These patterns suggest firms are increasingly able to introduce customized products or that consumers can better find them, and carry implications for market power and consumer welfare.

Keywords: Product Concentration, Market Power, Markups, Polarization, Long-tail

JEL Classification: E21, E31, D12, D4

Suggested Citation

Neiman, Brent and Vavra, Joseph, The Rise in Household Spending Concentration (May 7, 2018). Available at SSRN: https://ssrn.com/abstract=3137782 or http://dx.doi.org/10.2139/ssrn.3137782

Brent Neiman

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://faculty.chicagobooth.edu/brent.neiman/index.html

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joseph Vavra (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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