Tuesday, July 13, 2010

Nick Rowe Mike Moffatt Gets Really Sloppy

UPDATE: I am embarrassed but maybe the great guys at Worthwhile Canadian Initiative will make it clearer who is posting (but there is no legitimater claim I should have been confused.)
Well, that's how I see it.
He says this at his excellent blog (absolutely one of my favorites!):
These items, by themselves, make up a small portion of a family's budget. You don't see them posted on signs outside of stores. I would be shocked if anyone who doesn't work in a grocery store could name the price of even 2 of 5 of these items, at their local grocery stoe, within +/- 5%.
For customers to have a preference for constant or 'sticky' prices, they need to know when a price changes. But how can they know if the price of one of these items increased by a small amount, when they don't even know the price in the first place?
My guess is Nick is who I was a couple of years ago, not too constrained by current costs. Now constrained by costs, I could certainly tell him what the key prices in the latest grocery flyers are, and which discount grocer is the place to go for which food; moreover, I respond strongly.
And what about gasoline? Well, I do tune how I travel to those costs, but one should understand (and Nick likely does NOT) that there is no major point to shopping around for gasoline, and only a limited ability to change how much one buys. Food price differences week to week are stunning (I had no idea until I retired, and my wife, still employed, will hardly believe me).
I have commented at Nick's post, and I recommend others do, though I suspect demographics might affect the likelihood of expert testimony here - (e.g. I treat internet access like gasoline costs, as somewhat fixed, while I suspect many others who have my internet access do not have to worry about grocery costs).


At 4:23 PM, Blogger Nick Rowe said...

:-) Alan, like me, you need new glasses, or a better computer screen!

I shop around for gas, and for food. But as Mike says, I know the price of gas better than the price of apples (the only one of his 4 items I buy). And that's a puzzle.

At 4:38 PM, Blogger Alan Adamson said...

That is silly. the gas price diffees marginally from station to station. The price of apples can vary easily by a factor of four from shop to shop.
How much this matters obviously depends on what you plan to be doing in the next few days; I can only say it matters to me, an upper-middle class guy with no income now.

At 4:58 PM, Blogger Alan Adamson said...

Hmm I have to agree in a way, I now think.
I too know the price of gas more than of apples on a day-to-day basis; I have a slightly greater ability than many to respond.
But Nick is right? Why should I (or the logical me) have lesser knowledge of the price of apples.
I agree that in general that is a problem.
Iti s not for me. Apples and what they cost matter; even more tubs of yogurt. Far less down the line, gasoline. Partly because lifestyle simply requires committing some degree of gasoline, in a way apples do not (after all, I could eat bananas).

At 6:35 PM, Blogger Nick Rowe said...

Alan: re-read the post. It wasn't my post. Hence my comment about glasses and computer screens!

But I agree it would make much more sense for us to be more aware of prices that differ a lot from one store/gas station to another. But we don't seem to. That's a puzzle.

At 7:09 PM, Blogger Alan Adamson said...

Nick - have updated my post to blame Mike, though guys are all great.
But I remain baffled at your claim people are not aware of price differences. Am I ever in ways I was not two years ago (in what I will bet were your circumstances). Moreover, it is a simple fact that gas prices simply do not differ much while food prices reward hunter-gatherer behavior.
I still think people who take your position do so simply because they have an income they expect to move with prices.
I bet none of of you has actually studied the behavior of the people I find myself shopping with, who seem damned savvy to me.

At 7:50 PM, Blogger Nick Rowe said...

Alan: No worries!

Maybe it's not income that matters, but the scarcity of time. If you have time to watch and remember prices, and shop around, you do so. Then that keeps prices low, and other people, who don't have time, free ride off your tendency to discipline firms that charge too high prices.

At 8:02 PM, Blogger Alan Adamson said...

Your observation regarding time is very crucial. I now find it NO problem browsing grocery flyers; or lying around enjoying episodes of 'Bones'. But Mike is underestimating how effective that time is in saving money. This is why if you go to Food Basics and the likes you will see people rolling out carts of products at a KNOWN good price that week. You will never see that at Loblaws, where employed profs work.
I see this every work with my wife (an employed prof) (we run separate finances and households pretty much).


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