Inattention and Prices Over Time: Experimental Evidence from 'The Price Is Right' (1972-2019)

Abstract

This paper uses nearly five decades of data from "The Price Is Right", the longest running gameshow in television history, as a natural experiment to understand how attention to prices has changed in recent decades. Using nearly 30,000 trials (120,000 bids) of the one-bid “Contestant’s Row” game from 1972 to 2019, contestants have increasingly underestimated the true price of the good over time with an increasingly greater magnitude, suggesting that individuals have become more inattentive to prices. These bid deviations are correlated with inflation expectations which could potentially be the result of sustained periods of low inflation or the introduction of new technology that diminish the benefit of acquiring and retaining such price information. These results have several implications for the formation of inflation expectations and price dynamics.

Keywords: Inattention, Natural Experiments, Prices, Inflation, Behavioral Macroeconomics

JEL Classification: C9, E3, E7