A Concise Test of Rational Consumer Search A Concise Test of Rational Consumer Search

By Chloe Lee, María José Luengo-Prado, and Bent E. Sorensen

The authors conduct a novel test of rational price-search and confirm empirically that consumers allocate relatively more time (or attention) to finding better prices for goods of which they consume relatively more; that is, consumers who purchase more units than other consumers in a particular product category pay lower prices for those products. Additionally, as consumers increase their consumption in a category, they pay lower prices for those goods. The authors also find that, consistent with other studies, retirees pay relatively less for goods, wealthy individuals pay more, and generally there are large differences in the prices consumers pay on average. Better prices are mostly obtained by frequently visiting different stores.

see more

up down Key Findings