The Rise in Household Spending Concentration

Using detailed scanner data, we document a steady and significant increase in the concentration of household spending across products. However, households are increasingly segmenting and concentrating expenditures on different products, so aggregate product concentration has actually declined even as household concentration has risen. While there is some heterogeneity, rising household product concentration is pervasive across geographic locations, product categories, and demographic groups. We show household concentration grows most rapidly in retail chains that introduce the most new products and that households with more concentrated product spending pay more for the products they purchase. These patterns suggest that suppliers have greater market power as they provide consumers with increasingly differentiated products.