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Journal of Economic Perspectives: Vol. 23 No. 2 (Spring 2009)

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Consumer Shopping Behavior: How Much Do Consumers Save?

Article Citation

Griffith, Rachel, Ephraim Leibtag, Andrew Leicester, and Aviv Nevo. 2009. "Consumer Shopping Behavior: How Much Do Consumers Save?" Journal of Economic Perspectives, 23(2): 99-120.

DOI: 10.1257/jep.23.2.99

Abstract

This paper documents the potential and actual savings that consumers realize from four particular types of purchasing behavior: purchasing on sale; buying in bulk (at a lower per unit price); buying generic brands; and choosing outlets. How much can and do households save through each of these behaviors? How do these patterns vary with consumer demographics? We use data collected by a marketing firm on all food purchases brought into the home for a large, nationally representative sample of U.K. households in 2006. We are interested in how consumer choice affects the measurement of price changes. In particular, a standard price index based on a fixed basket of goods will overstate the rise in the true cost of living because it does not properly consider sales and bulk purchasing. According to our measures, the extent of this bias might be of the same or even greater magnitude than the better-known substitution and outlet biases.

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Authors

Griffith, Rachel (U College London and Institute for Fiscal Studies, London)
Leibtag, Ephraim (Economic Research Service, USDA)
Leicester, Andrew (U College London and Institute for Fiscal Studies, London)
Nevo, Aviv (Northwestern U)

JEL Classifications

D12: Consumer Economics: Empirical Analysis
E21: Macroeconomics: Consumption; Saving; Wealth

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