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

36 Pages Posted: 25 Mar 2020 Last revised: 4 Feb 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: March 2020

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 price variance decomposition that is an adaptation of Kaplan and Menzio's (2015) approach. We find 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 a more important source of variation in consumer savings. 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.

Keywords: consumer basket, consumer saving, grocery shopping, price dispersion, 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 (March 2020). CEPR Discussion Paper No. DP14514, Available at SSRN: https://ssrn.com/abstract=3560322

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

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Centre for Economic Policy Research (CEPR)

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Yupei Ma

University of British Columbia (UBC) ( email )

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Vancouver, British Columbia BC V6T 1Z4
Canada

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