“One of the great ironies in modern America,” writes Mehrsa Baradaran in her 2015 book How the Other Half Banks, “is that the less money you have, the more you pay to use it.” Baradaran, an associate professor at the University of Georgia’s law school, was referring to the outrageously high fees that low-income workers must pay to “fringe” banks just to access and manage the money they’ve earned.

Her point—that when people don’t have much, a single dollar in some ways doesn’t go as far as it otherwise would—extends to several other parts of Americans’ financial lives, including how they shop.

In a recent working paper, the University of Michigan’s A. Yesim Orhun and Mike Palazzolo, point to how two of American shoppers’ (and marketers’) favorite money-saving strategies, the limited-time offer and buying in bulk, come with savings that are more accessible to some consumers than others. Choosing to buy things when they’re on sale or packaged in huge quantities is something lots of shoppers may take for granted as a matter of preference, but for many, these purchases—and the savings that come with them—are out of reach.

To see how often consumers at different income levels take advantage of discounts, Orhun and Palazzolo analyzed seven years’ worth of data on toilet-paper purchases made by over 100,000 American households. They picked toilet paper because it’s “tailor-made” for what they’re interested in studying: It’s often sold in bulk, it’s frequently on sale, and it’s non-perishable and easily storable.

They found that high-income households (those making $100,000 or more a year) bought their toilet paper on sale 39 percent of the time, whereas low-income households (those making $20,000 or less a year) only did so 28 percent of the time. High-income households were also more likely to buy more rolls of toilet paper at a time, which meant not only that they were saving money on each roll, but that they didn’t have to make as many trips to the store. “Low income households,” Orhun and Palazzolo write, “are less likely to utilize these strategies even though they have greater incentives to do so.”



These differences produce a striking pattern: Orhun and Palazzolo calculate that because low-income shoppers don’t take full advantage of sales and buying in bulk, they end up paying about 6 percent more per sheet of toilet paper than high-income households. At the same time, lower-income households seem to be compensating for this premium by buying cheaper brands—a trend working in the other direction, saving them about 9 percent per sheet, compared to high-income households. “Therefore,” Orhun and Palazzolo write, “about two-thirds of the savings low income households accrue through brand choice is forfeited by their relative inability to utilize intertemporal money-saving strategies.” (Whether products with fancier brand names are truly better, and whether it’s a loss to miss out on them, is another matter.)

High-income households might be buying more rolls of toilet paper at a time because they’re more likely to have the cars to transport them and then the space to store them at home. But even after controlling for those possibilities, Orhun and Palazzolo find that what matters is how much cash a given household has on hand when a deal presents itself.

These disparities—paying 6 percent more when not buying in bulk or on sale—may seem minuscule, but they can matter on the scale of a household. Considering every sheet of toilet paper, every can of soda, every garbage bag, every bottle of vegetable oil, the premium adds up. (Plus, the researchers note that because their data set was less than perfect, they consider 6 percent a lower bound for the toilet-paper premium.)

On top of that, Orhun and Palazzolo’s data suggests that poorer and richer consumers aren’t just buying products in different quantities—they’re sometimes doing so at different stores entirely. At corner stores, the price per sheet of toilet paper (or paper towel, or tissue, and so on) is much higher than at warehouse stores such as Costco and Sam’s Club—stores where the average customer tends to be somewhat well-off.



There is something of a debate among economists about how and where lower-income consumers choose to spend their money. One on hand, there are academics who have documented the ways in which an environment of poverty—all of the uncertainty and stress that comes from not having enough money—makes people worse decision makers. The argument isn’t that they’re inherently less sharp, but that they become, as a result of their circumstances, more prone to making irrational, present-biased choices. On the other side, there is a body of evidence supporting the idea that those without much money are simply making the best possible decisions they can make, given their crummy circumstances.

One detail in Orhun and Palazzolo’s paper backs up the latter approach. As they analyzed their data, they had a hunch that because liquidity appeared to be playing such a big role in whether a household pounced on sales or bought in bulk, low-income households’ spending patterns might change after the arrival of a paycheck. Indeed, during the first week of the month, when many workers’ paychecks come in, low-income shoppers were more likely to buy toilet paper on sale and in bulk, such that the per-sheet premium they’d been paying compared to richer shoppers dropped by 30 percent. It seems that when finances are even slightly less tight, poorer shoppers start to make the same prudent decisions that richer ones have the luxury of making all month long.