The influence of supermarket prices on consumer inflation expectations

Chew Lian Chua, Sarantis Tsiaplias

Research output: Journal PublicationArticlepeer-review

1 Citation (Scopus)


Using data on the inflation expectations of 85 thousand consumers and a unique data set of price changes at Australian supermarkets, we show that consumers form inflation expectations that are excessively influenced by particular elements of the cross-sectional distribution of price changes. The estimates provide novel evidence that the right tail of supermarket price changes, which has largely been ignored in the literature to date, is a material factor in explaining inflation expectations. The right tail of supermarket price changes materially raises inflation expectations, particularly for lower income households, leading to the presence of income-dependence in the expectation formation process. The results shed new light on the informativeness of cross-sectional supermarket price changes for consumer beliefs about inflation.

Original languageEnglish
Pages (from-to)414-433
Number of pages20
JournalJournal of Economic Behavior and Organization
Publication statusPublished - Mar 2024


  • Cognitive limitations
  • Consumers
  • Inflation expectations
  • Rational inattention
  • Supermarket prices

ASJC Scopus subject areas

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management


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