Or Avishay-Rizi

How do firms and consumers respond when consumers realize they pay more than others for the same product? We study the effects of a regulation that required Israeli retailers to display on-the-shelf signs showing the average (cheap) international price of products alongside the price in the local store. We find that shortly after the regulation was introduced, prices fell on average by 8%. Prices of products that were more expensive compared to their international counterparts, experienced larger reductions. Quantities sold increased, yet these increases were significantly smaller than predicted given the price drops and pre-regulation demand elasticities. Products that experienced smaller increases in quantities were those that remained relatively expensive. To explain these findings, we develop and estimate a version of Eyster et. al 2021, who consider a setting where consumers dislike unfair pricing. Our estimates suggest that a 1% local price reduction is equivalent to a 3% international price increase. We discuss implications for optimal pricing and models of salient thinking.

How well can firms predict and respond to future shifts in consumer demand? We investigate this question by examining the effects of a nationwide labeling policy for unhealthy food products. Our analysis uses a novel dataset of hand-collected information over several years, supplemented with administrative data. We first show that sales of products with warning labels dropped sharply, with significant variation across product categories and consumer segments. To avoid the labels, firms strategically adjusted their product designs so that reformulated products fell just below the labeling threshold. Importantly, firms targeted their reformulation efforts toward products that would have been most adversely affected by the labels—both within the most impacted categories and among products sold to the most responsive consumers.Moreover, larger and more successful firms were better at anticipating these demand shifts, which translated into improved performance.

Expenditure on food represents a considerable share of household spending, and policy-makers are considering various means to reduce food prices. In this paper we investigate the effects of information-enhancing initiative in the Israeli retail food market. The initiative involved a monthly comparison of the price of a fixed basket of 68 popular goods sold by Israeli supermarket chains. Using detailed price information and a difference-in-differences research design, we find a drop of 4% in the basket price. The drop in prices is concentrated among publicly-traded retailers, and it rises after media reports on the results of the basket comparison. Overall, our findings suggest that drawing attention to prices could be an effective means by policy makers to foster competition and reduce prices.