| Peter Klein |
Like other members of the O&M community in the Northern Hemisphere I’m enjoying the lazy days of summer. This week I’ve been on an extended-family vacation in Destin, Florida — heart of the “Redneck Riviera” — reading mindless fiction, drinking piña coladas, and showing off my Body by InBev. One thing that surprises me is that prices at the local grocery store, and the local Wal-Mart (sorry, Walmart >|<), are no higher than the prices back home, even though the price elasticity of demand is surely lower. Why don’t resort-town stores price like stores in airports or at ski resorts? Demand isn’t quite that inelastic, but presumably less elastic than demand in year-round communities. Likewise, one would expect Walmart prices to be significantly lower in retirement communities or other areas populated by price-sensitive shoppers.
I asked my colleague Emek Basker, a Walmart expert, and she says that while there’s plenty of anecdotal evidence of variation in price (and product selection) across Walmart stores, she doesn’t know any empirical studies explaining these differences systematically in terms of price elasticities, income, labor costs, etc. Anybody know of such studies?