Store Expensiveness and Consumer Saving: Insights from a New Decomposition of Price Dispersion

34 Pages Posted: 14 Apr 2020 Last revised: 19 Sep 2022

See all articles by Sofronis Clerides

Sofronis Clerides

University of Cyprus; Centre for Economic Policy Research (CEPR); University of Bologna - Rimini Center for Economic Analysis (RCEA)

Pascal Courty

University of Victoria; European University Institute - Economics Department (ECO); Centre for Economic Policy Research (CEPR)

Yupei Ma

University of British Columbia (UBC)

Multiple version iconThere are 2 versions of this paper

Date Written: September 18, 2022

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 the basket rather than at a store that is cheapest 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

JEL Classification: D12, D14

Suggested Citation

Clerides, Sofronis and Courty, Pascal and Ma, Yupei, Store Expensiveness and Consumer Saving: Insights from a New Decomposition of Price Dispersion (September 18, 2022). Available at SSRN: https://ssrn.com/abstract=3557202 or http://dx.doi.org/10.2139/ssrn.3557202

Sofronis Clerides (Contact Author)

University of Cyprus ( email )

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HOME PAGE: http://sofronis.clerides.com

Centre for Economic Policy Research (CEPR) ( email )

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University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

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Pascal Courty

University of Victoria ( email )

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Canada

European University Institute - Economics Department (ECO) ( email )

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Centre for Economic Policy Research (CEPR)

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United Kingdom

Yupei Ma

University of British Columbia (UBC) ( email )

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Vancouver, British Columbia BC V6T 1Z4
Canada

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