The short- and long-run effects of the vector grocery store consumer price information program

Abstract

This paper uses a theory of the way information affects average prices, the price distribution across stores, and the degree of concentration within the retail grocery industry to estimate the effects of Vector Enterprise's consumer information program. Since 1972, Vector has ShOl1n each grocery chain's prices on cable television in many cities. By providing consumers with a relatively easy and inexpensive method of comparing prices across grocery chains, Vector's information program has increased the competitiveness of the retail grocery industry in those cities. The first section of this paper presents a summary of the theoretical model used in this study. The problems of using indexes to provide information about grocery prices are described in the second section. The third section summarizes the major results of previous empirical studies. In the fourth section, Vector's information program is described. The effects of the program on average prices are examined in the fifth section. The sixth section analyzes the impact of the program on the degree of concentration within the retail grocery industry·. The effects of the program on the distribution of prices across stores are examined in the seventh section. The last section presents conclusions and suggestions for further research.