Transcript Pamela-Item-Pricing

Bill to end ‘item pricing’
introduced in Michigan
January 27, 2011
The Associated Press
http://www.bloomberg.com/news/2011-01-27/bill-to-end-item-pricing-introduced-in-michigan.html
The Latest
• In his State of the State address, Governor Rick Snyder
proposed repealing Michigan’s law requiring price tags
on most retail items
• A week later, the legislation to repeal was introduced by
Republican Rep. Lisa Posthumus Lyons of Alto
• The Michigan Retailers Association says the law is a
hidden tax on consumers, and results in higher prices in
stores
• The United Food and Commercial Workers union argues
that jobs would be lost in grocery stores if the law were
to be repealed
Outmoded Consumer Protection:
The Incompatibility of Item Pricing
Laws and Radio Frequency
Identification
October 12, 2010
By David Wyld, Southeastern
Louisiana University
http://www.bukisa.com/articles/372597_outmoded-consumer-protection-the-incompatibility-of-item-pricing-laws-and-radio-frequency-identification
Why are there IPLs?
• Item pricing laws were enacted the 1970’s and
80’s to protect consumers from being
overcharged due to scanning errors
• IPLs are supported by consumer advocates,
and now by workers’ unions, who believe that
the repeal would threaten jobs
• IPLs currently exist in ten US states;
Michigan’s, which includes non-food items, is
one of the most stringent.
Arguments Against
• Retailers argue that the costs of compliance, and
high fines for non-compliance, translate to
increased costs for the consumer – a hidden tax.
• Researchers found that prices in markets subject
to IPLs were between 20-25 cents higher than
prices for similar items in other markets
• IPLs impede large retailers’ abilities to change
prices.
• There are further advances in item-pricing, like
Radio Frequency Identification, that current
Michigan law makes impossible to utilize.
Effects of IPLs?
• With the increased
costs associated with
IPLs, supply has
decreased, leading to
higher prices and
lower quantities.
• The Governor
believes that
repealing Michigan’s
IPL will not only get
us back to the original
supply levels, but give
retailers a chance to
use better
technology.
Supply, with tax
Price ($)
Demand
Supply, original
Supply, better
technology
P w/ tax
P*
P w/ tech
Q w/ tax Q* Q w/ tech
Quantity
Assumption: Tax Burden
• But does the tax
Price ($)
burden really fall on
the consumer?
Demand
• That depends on the
elasticity of demand
and supply curves; P w/ tax Consumer
different kinds of
incidence
P*
Producer
goods have different
incidence
curves.
•When the demand
and supply curves
have similar
elasticities, the
Q w/ tax
burden is shared.
Supply, with tax
Supply, original
Tax
Q*
Quantity
Tax Burden
Supply, with tax
• When the
demand curve is
elastic and supply is
inelastic,
Price ($)
Consumer
incidence
Supply, original
Demand
P w/ tax
P*
most of the burden
goes to the
producer.
Producer
incidence
Q w/ tax
Tax
Q*
Quantity