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

26 Pages Posted: 14 Apr 2020 Last revised: 20 Mar 2021

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: February 6, 2021

Abstract

We build on recent work analyzing consumers' ability to save by exploiting price dispersion in grocery stores. We show that store expensiveness is not universal but varies across consumers depending on the basket they consume. We incorporate this insight into a decomposition of price variance that is a refinement of Kaplan and Menzio's (2015) approach. Our analysis finds that the ability to choose the right product at the right store is much less important than Kaplan and Menzio found; rather, the ability to choose the cheapest stores for one's basket is the main source of variance in consumer savings. This finding suggests an elevated role for consumer baskets in the analysis of grocery shopping and has interesting implications for the stores’ choice of product assortments.

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 (February 6, 2021). 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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United Kingdom

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

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Rimini (RN), RN 47900
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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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