Friday, March 03, 2006
How could the Coase theorem be used in this case? Any guesses at what the efficient solution may look like?
"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)