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Selective bargain hunting: A concise test of rational consumer search

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Listed:
  • Chloe Lee
  • Wen Long
  • María J. Luengo‐Prado
  • Bent E. Sørensen

Abstract

A model of time‐allocation among work, leisure, and price‐search predicts that rational consumers pay relatively low prices for their preferred goods. Using scanner data, we confirm empirically the implication that consumers find better prices for items (defined by scanner codes, such as a 12‐pack of Pepsi) within categories (such as carbonated drinks) of which they consume relatively more. This provides direct evidence that consumers face constraints on time and/or attention, and that they rationally allocate these scarce resources to optimize welfare.

Suggested Citation

  • Chloe Lee & Wen Long & María J. Luengo‐Prado & Bent E. Sørensen, 2021. "Selective bargain hunting: A concise test of rational consumer search," Economic Inquiry, Western Economic Association International, vol. 59(3), pages 1089-1105, July.
    • Handle: RePEc:bla:ecinqu:v:59:y:2021:i:3:p:1089-1105
    DOI: 10.1111/ecin.12970
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