Wednesday , December 12 2018
Home / Adam Smith Institute / Higher prices aren’t because costs are higher, they’re because they can charge more

Higher prices aren’t because costs are higher, they’re because they can charge more

Summary:
Small stores, conveniently located, open all hours, charge more than vast sheds operating at peak efficiency. This shouldn’t be a surprise to anyone, that this happens. We do all, after all, do the bulk shopping in the sheds and top up with what we’ve forgotten at the corner shop. We know it well enough that our habits accord to it.However, we do need to be clear about why this happens:Express supermarkets are charging customers up to three times more for their groceries than superstores from the same chain, an investigation has found.Some fruit and vegetables have a mark up of up to 177 per cent as smaller shops charge more for the same product.Branded items do not have consistent prices across stores from the same chain either, according to the investigation by the BBC.The analysis found

Topics:
Tim Worstall considers the following as important:

This could be interesting, too:

Don Boudreaux writes Quotation of the Day…

Tim Worstall writes We can’t afford social care already so let’s promise ourselves more

Kai Weiss writes Tax Competition: A Practical Way to a Low-Tax World

José Niño writes The Deep State Wants Your Guns

Small stores, conveniently located, open all hours, charge more than vast sheds operating at peak efficiency. This shouldn’t be a surprise to anyone, that this happens. We do all, after all, do the bulk shopping in the sheds and top up with what we’ve forgotten at the corner shop. We know it well enough that our habits accord to it.

However, we do need to be clear about why this happens:

Express supermarkets are charging customers up to three times more for their groceries than superstores from the same chain, an investigation has found.

Some fruit and vegetables have a mark up of up to 177 per cent as smaller shops charge more for the same product.

Branded items do not have consistent prices across stores from the same chain either, according to the investigation by the BBC.

The analysis found that a Tesco Express store sold a banana for 25p, while the local superstore sold it at a fraction of the price for 9p.

Similarly at Marks and Spencer, a banana costs 40p in the convenience store and 18p in the big shop.

Only the complete dullards among us don’t know that this is true. But why?

The shops all said the mark-ups were due to smaller shops facing higher operating costs, including higher rents and increased rates for longer opening hours.

No, that’s not it. Costs don’t determine prices - they only determine whether you stay in business given the prices you can charge. Higher prices are charged because people can charge higher prices. Which is a function of competition, nothing else.

Yes, this is an important distinction. It is markets which solve our problems.

Tim Worstall
Tim Worstall is a British-born writer and Senior Fellow of the Adam Smith Institute. Worstall is a regular contributor to Forbes and the Register. He has also written for the Guardian, the New York Times, PandoDaily, the Daily Telegraph blogs, the Times, and The Wall Street Journal. In 2010 his blog was listed as one of the top 100 UK political blogs by Total Politics.

Leave a Reply

Your email address will not be published. Required fields are marked *