Tuesday, March 29, 2011

another way about thinking about sticky pricing?

NYT ran an article about how grocery stores are packaging less quantity for the same price. its a stealthy way of dealing with rising food commodity prices.
Certainly, seeing a headline number (i.e. price) increase is likely to cause the consumer to switch to cheaper substitutes or just reduce overall consumption demand. to avoid this, firms are apparently "keeping" the price but changing the quantity sold. To this extent, arguing that prices are "sticky" in this instance seems to be dependent on the nature of the good, and how divisible it is. Eg. the price is the same for one box of oreos, but is it the same amount of ingredients going into the oreo?

while deceptive, some of my friends note that this might be a good thing for some people's dietary habits. Selling 1.8 litres or 1.5 litres ice-cream in what used to be a 2 litre tub could help curb certain excessive binging. Secondly, these companies are not necessarily engaging in false advertising. It seems that in all other aspects except for the quantity, the packaging of the food item is the same, hence leading people to think that its the same quantity that they used to purchase. Awareness of possible shrinking packages may prompt consumers to read the label more and be more aware of what they are consuming and also exactly how healthy it is.


but yeah its still sneaky. there is a cost to having to be more careful and not being able to take certain things for granted.



2 comments:

Jarrett said...

I'm okay with companies doing it, even NOT announcing it. But when they lie about it...

http://www.youtube.com/watch?v=_FiA57ir5QM

Why is it so hard to just point to rising cocoa costs?

shu said...

haha wow. thanks for the link. i mean, you think after what happened to bill clinton and his denial over a certain monica lewinsky that such adamant "assurances" are just an overall bad deal....