Wednesday, October 8, 2014

Economy: Why Big Cities Have Lower Food Prices

(Drivebycuriosity) - New York City is expensive. Every New Yorker complains about high rents and other high prices she or he has to pay. But there is at least one exception: Food prices. A statistics study by Jessie Handbury & David E. Weinstein from the University of Pennsylvania rejects "the common finding that prices tend to be higher in larger cities. Instead, we find that price level for food products falls with city size"  (oxfordjournals).

On the first glance these findings seems to be surprising. Shop owners in big cities have to pay higher rents. They therefore try to shift their costs to their customers. And residents of larger cities often have higher incomes than people in smaller towns because there are more high paid jobs (Banks, headquarters of companies, law firms

I believe the lower food prices can be explained by the fierce competition. In my neighborhood in New York`s Lower East Side there is a Deli almost at every corner. These little shops, elsewhere called convenience stores or kiosks, are competing against each other. Thus they are forced to keep their prices low. There also are a lot of super markets like Key Food, Union Market and Whole Foods. In smaller towns - and villages - the competition is much thinner.  Often you will find just one or two groceries in your neighborhood which can charge more with little risk to lose custumers.

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