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Selective bargain hunting: A concise test of rational consumer search
Author(s) -
Lee Chloe,
Long Wen,
LuengoPrado María J.,
Sørensen Bent E.
Publication year - 2021
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12970
Subject(s) - economics , test (biology) , microeconomics , welfare , work (physics) , consumer welfare , face (sociological concept) , public economics , engineering , mechanical engineering , paleontology , social science , sociology , market economy , biology
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.