Spatial Economics: Implications for Food Market Response to Retail Price Reporting

Abstract

Recent research has used the information theory approach to consider the effects of retail food price reporting systems (RFPRS) on price levels and interstore dispersions within metropolitan retail food markets. The information theory paradigm suggests that consumers may lack sufficient information to match preferences (price, product, service) with store offering. Although researchers have concluded that empirical findings generally support the information theory approach, a number of unanswered questions and inconsistent findings remain. This paper contributes to the debate by utilizing spatial microeconomic theory to provide answers to five questions posed by McCracken, Boynton, and Blake [22] in a recent Journal article. It is argued that price effects typically observed in RFPRS studies result primarily from alterations in the information to retailers, rather than consumers. Furthermore, inclusion of costly distance in the theoretical model leads to conclusions that are quite different from those derived by “spaceless” models.

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