Price variation across supermarkets in Singapore

Abstract

What are the factors that enable some supermarkets to charge a higher price for the same product? How does this influence consumer purchasing behaviour? In this paper, price indexes are constructed using primary price data on a basket of 81 goods to provide evidences of spatial price discrimination practised by supermarket retailers. These price indexes include normal prices and final prices as well as the exclusion of house brand product prices. Our study has identified four main factors namely geographical characteristics, chain characteristics, competition and location, which contribute to the price variations. Our main findings could be summed up as follow: (1) Geographical location of the supermarket affects the pricing decisions of supermarket chains. In particular, supermarkets charge higher prices in higher income, higher population density and non-neighbourhood areas. (2) Supermarket retailers adopt different pricing strategies by targeting different segments of consumers. Furthermore, from the survey conducted, shoppers' demographics were shown to affect their purchasing behaviour. Given these findings, supermarket prices are shown to be different across districts and chains.