An Empirical Investigation of the Impact of Gasoline Prices on Grocery Shopping Behavior

Abstract

The authors empirically examine the effect of gas prices on grocery shopping behavior using Information Resources Inc. panel data from 2006 to 2008, which track panelists’ purchases of almost 300 product categories across multiple retail formats. The authors quantify the impact on consumers’ total spending and examine the potential avenues for savings when consumers shift from one retail format to another, from national brands to private labels, from regular-priced to promotional products, and from higher to lower price tiers. They find a substantial negative effect on shopping frequency and purchase volume and shifts away from grocery and toward supercenter formats. A greater shift occurs from regular-priced national brands to promoted ones than to private labels, and among national brand purchasers, bottom-tier brands lose share, midtier brands gain share, and top-tier brand share is relatively unaffected. The analysis also controls for general economic conditions and shows that gas prices have a much larger impact on grocery shopping behavior than broad economic factors.