Consumer Choice Over Shopping Baskets

Abstract

I introduce a novel approach to structural modelling and estimation of continuous demand systems, utilising consideration sets to analyse differentiated products markets with very large choice sets and purchases over multiple goods, multiple units, and across product categories. I apply it to study intra-store competition in the Portuguese supermarket industry between 2020 and 2023, during which the country faced the COVID pandemic. Anonymised transaction-level point-of-sale data is sufficient to estimate price elasticities across almost 30 000 goods and more than 500 product categories. Results suggest mark-ups remained stable throughout the sample period, with a short-lived, slight increase post-pandemic observed only in the highest-mark-up-percentile goods. The implied mark-ups match observed price volatility, profit margin surveys, as well as reports on shifting consumer tastes during the sample period.