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Agreed: Tesco Express and Sainsbury Local (or whatever they call themselves) DO vary their pricing, even in a single neighbourhood. That may be to exploit different demographics, but even so makes the pricing more nuanced–quilted than this theory makes out; it narrows the gap between them and the Wetherspoon model. But secondly, as one of low income living in an area where incomers have driven up prices of housing beyond the capacity of any of my younger family members to purchase in a lifetime around here (yes, a London borough), why should I pay for the extremely well-to-do in my area by an extra impost on my household costs, specifically in the area of food and household goods?
The market structure is key to understanding the dynamic at work here. UK competition rules do allow (as in the US) some level of price flexing. Where it is restricted relates to the law which says cross-subsidisation between stores is anti competitive.
This means that a large, national chain cannot legally ‘under-price’ products in such a way as an individual store runs at a loss, but is kept going by more profitable stores in the chain. This is very sensible because it prevents chains from driving local traders out of business.
‘Aggressive pricing’ as done by Supermarkets has a direct effect on generating positive consumer surplus, but over time also changes the structure of the market. Cheaper products here also have a resultant effect on employment and wage levels. A small family business operating at the margins – which by definition would mean a living wage for them – will fold against the market power of larger suppliers.
In fact supermarkets do vary prices, and so the premise is a little shaky. They will tend to vary prices on their own brand products however, as agreements with their branded suppliers mean they will not be able to vary the prices of these goods as easily (for example if the a brand has already specified a set price on the packaging.)
‘Basics’ pitta bread in Hove is several times more expensive than ‘basics’ pitta bread in Barnsley, actually.
But the idea of differential pricing by area may be a huge red herring – the major divergence in incomes may not be between Hove and Barnsley, but within Hove. Thus differential pricing would hit the poorest hardest in areas seeing fast income growth. Should we, then, automate the rate of marginal extraction so that an algorithm decides the margin a supermarket makes on a product, second by second? We would lose a lot of existing consumer protections which are useful in that process, probably.
Intresting proposal… however when products number in the tens of thousands it would make it virtually impossible. That is unless the pricing could be changed electronically, rather than shelf edge labelling. Algorithms could be applied to take out the imbalance caused by ultra high earners who distort ‘average wage data.
An alternative may be to reduce price on locally sourced items, taking distance from supplier to store, so agricultural areas which have traditionally low wages, may in fact feed the poorer low wages population. This would also promote local over internationally sourced crops from as far afield as Vietnamese such as broccoli
This would make food in cities more expensive, but most cities have higher rates of pay, particularly London weighted areas.
The impact of AI and robots is not as one sided as many higher skilled jobs are set in cross hairs of programmers across the world.
For the majority of humanity the need for employment may lead us to care based jobs as the only viable income.
Automation targets biggest investment incomes… retail may squeal before it relies the world is many steps ahead.