Trying Harder and Doing Worse: How Grocery Shoppers Track Their In-Store Spending

Abstract

An estimated one in three American households has to carefully plan their budgets and spend accordingly. Budget-allocation and spending-behavior models often implicitly assume that budget-constrained shoppers are knowledgeable about the total price of their shopping basket as they shop (Bénabou and Tirole 2004). Because shoppers’ price estimates of their shopping baskets mediate the relationship between budget allocation and actual in-store spending, it is critical to understand whether and how shoppers determine the total price of their baskets. Inaccuracies in their estimates likely have implications for consumer welfare (Heath and Soll 1996) and retail performance (Gómez, McLaughlin, and Wittink 2004).

Despite the importance of understanding how budget-constrained shoppers estimate the total price of their baskets while shopping, it remains largely unclear whether, when, and how they keep track of their in-store spending.