I do, it seems. Don’t tell my suppliers, but I am a big fan of zero price search. Mark Aguiar and Erik Hurst write:
Using scanner data and time diaries, we document how households substitute time for money through shopping and home production. We find evidence that there is substantial heterogeneity in prices paid across households for identical consumption goods in the same metro area at any given point in time. For identical goods, prices paid are highest for middleaged, rich, and large households, consistent with the hypothesis that shopping intensity is low when the cost of time is high. The data suggest that a doubling of shopping frequency lowers the price paid for a given good by approximately 10 percent. [TC: is that all????] From this elasticity and observed shopping intensity, we impute the shopper’s opportunity cost of time, which peaks in middle age at a level roughly 40 percent higher than that of retirees [emphasis added]. Using this measure of the price of time and observed time spent in home production, we estimate the parameters of a home production function. We find an elasticity of substitution between time and market goods in home production of close to 2. Finally, we use the estimated elasticities for shopping and home production to calibrate an augmented lifecycle consumption model. The augmented model predicts the observed empirical patterns quite well. Taken together, our results highlight the danger of interpreting lifecycle expenditure without acknowledging the changing demands on time and the available margins of substituting time for money.
Here is the paper, and thanks to Bruce Bartlett for the pointer. We also learn that people with children pay higher prices (presumably they have less time to search) and people in their forties with children pay the highest prices of all, six to eight percent more than people in their twenties or sixties.
I also take these results to imply that poor households, which shop more frequently and pay lower prices, are better off in material terms than CPI-based measures of real income will imply. That being said, they also have less time. Fans of the "happiness literature," which suggests more money above a certain level doesn’t make you better off, should favor less search. After all, we are told that people enjoy time spent with friends more than either money or sex. So does this view (not mine) suggest that we shut down discount outlets and induce more consumption of time? Are single price monopolies better than price discrimination? Is Marshall’s the true enemy of the middle class?