In this paper, we differentiate consumption from expenditure by incorporating price search decision into an otherwise standard life-cycle model. In our model, households can pay lower prices for the same consumption good if they allocate more time for price search. We first analytically show...

In this paper we introduce price search decision to a life cycle model, and differentiate consumption from expenditure. The consumers with low wealth and bad income shocks search more and pay less which makes their consumption higher than a model without search option. A plausibly calibrated...