The First of the Month Effect: Consumer Behavior and Store Responses


Justine Hastings and Ebonya Washington

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Hastings, Justine & Ebonya Washington (2010) "The First of the Month Effect: Consumer Behavior and Store Responses," American Economic Journal: Economic Policy 2: 142–162. DOI: 10.1257/pol.2.2.142
Previous research has demonstrated that benefit recipients decrease expenditures on, and consumption of, food throughout the benefit month. Using detailed grocery store scanner data, we ask two questions: whether cycling is due to a desire for variety that leads to within-month substitution across product quality, and whether cycling is driven by countercyclical retail pricing. We find that the decrease in food expenditures is largely driven by reductions in quantity, not quality, and that prices for foods purchased by benefit households vary pro-cyclically with demand, implying that households could save money by delaying their food purchases until later in the month.
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