Firm responses to income inequality and the cost of time

The full cost of shopping includes the cost of the shopper's time. When that cost increases, stores have incentives to respond in ways that economize on shopper time. One response is to substitute in-store labor for shopper time. Pooled cross-sectional tests using data from suburban and city food stores show that various labor intensity measures are higher where the opportunity cost of shopper time is higher. We distinguish between income and cost of time effects by showing that store labor intensity depends on the composition of income between male and female members of the family, and not only on the level of family income. We obtain similar results for two other ways that food stores can economize on shopper time-locating closer to the customer and offering more check out stations within a store. We also use a unique shopping time survey to show that shoppers from higher income households make fewer visits to food stores, spend less time per visit in the check out line and are more likely to shop at stores with longer hours.