Rising Prices: Do Large Chains Really Coordinate Pricing?
Ma’ariv, Israel, December 30
Who among us hasn’t switched their go-to supermarket chain in an effort to lower the cost of their regular shopping basket? But the truth is that we switch from one large chain to another – and yet the final bill remains identical. This begs the question of price coordination. Do large supermarket chains coordinate the prices of their products behind closed doors? Out of curiosity, I decided to run a small experiment. My goal was to find out whether there is, indeed, price coordination, or if the price increases have more to do with the cost of production. I visited two different markets and shopped for the exact same list of products. You won’t believe it, but the exact same list of products turned out to be twice as expensive at the markets compared to the retail chains! In other words, small merchants and shop owners charged over twice as much as supermarkets did for the same goods. This all suggests that some level of coordination is, indeed, taking place. Everyone adjusts themselves to a certain price level that is agreed upon, whether formally or tacitly. The obvious question is, of course, who’s the first to set the price level? That is, who is the player that sets the price and has everyone follow suit? – Rotem Tuni (translated by Asaf Zilberfarb)