Friday, March 03, 2006

Wal-Mart Lawsuit

A post on Division of Labour discusses an unusual lawsuit that has been filed against Wal-Mart (the original article is from the Detroit News):

"LANSING -- State Attorney General Mike Cox said Wednesday he is taking legal action against Wal-Mart after an investigation at five of the retailer's stores found up to 80 percent of the merchandise didn't carry price tags."

Nearly 100% of the merchandise in my local Wal-Mart doesn't have price tags so what's the rub? Michigan has an item pricing law mandating that merchandise have old-fashioned price tags. So-called consumer advocates bleat about mispricing from scanners and barcodes, but the law is most likely a make-work sop to unionists. The Michigan AG is now using the law to beat up Wal-Mart--I'd bet dollars to donuts that it's either outright false or a case of selective enforcement.
BTW, Emory's Paul Rubin has a paper (with co-authors) examining the effects of item pricing laws. The money line:

"We find consistent evidence across products, product categories, stores, chains, states, and sampling periods, that the prices at stores facing item-pricing laws are higher than the prices at stores not facing the item-pricing laws by about 25 cents or 9.6% per item."


Why would forcing companies to list prices result in higher prices at the stores?

Also, explain what the author means when he says that the Michigan law is "most likely a make-work sop to unionists"?

(Source: Division of Labour)

3 comments:

Paul H. Rubin said...

Why would forcing companies to list prices result in higher prices at the stores?

Reply:

It is not posting prices; it is the requirement that each item actually have a price tag attached to it. That is expensive. also it makes changing prices more expensive so they change less often.

BTW, a new version of the paper is available at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=885906

Paul Rubin

Anonymous said...

Although very small, it is very important to have price tags attached to all merchandise for the benefit of the company and also everyone shopping.

First off, everything being sold in a store that has a price tag, makes it a lot easier to buy. Having price tags increases the organization of the store, and the simplicity of making a sale to a customer. Sometimes it is very frustrating to not know how much something costs, and even though it costs money to have price tags on merchandise, it will overall benefit the company and increase sales.

Listing prices on the merchanise would increase prices because labor is needed to put price tags on everything. However, i think it would help the company be more organized and make it easier for customers to make purchases.

Paul Moustoukas

Anonymous said...

Stores that are required to put price tags on all their merchandise are going to jack up the prices for two reasons. First, because it costs money to print the price tags and to pay for the labor required to attach the tags to every single item the store sells. Second, if what some consumers claim is actually true and stores do jack up prices on items that don't have tags just because the consumer is unaware of the price, then Michigan stores cannot rely on that ploy and are forced to raise and list the higher prices.

-Stephen Dysart