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Xerox University Microfilms 300 North ZaabRoad Ann Arbor, Michigan 40100 76-24,586 DEVINE, Donald Grant, 1944- AN EXAMINATION OF THE EFFECTS OF PUBLISHING COMPARATIVE PRICE INFORMATION ON PRICE DISPERSION AND CONSUMER SATISFACTION. The Ohio State University, Ph.D., 1976 Economics, agricultural Xerox University Microfilms , Ann Arbor, M Ichlgan 48106 © 1976 DONALD GRANT DEVINE ALL RIGHTS RESERVED AN EXAMINATION OF THE EFFECTS OF PUBLISHING COMPARATIVE PRICE INFORMATION ON PRICE DISPERSION AND CONSUMER SATISFACTION DISSERTATION Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of The Ohio State University By Donald Grant Devine, B.Sc.A., M.Sc., M.B.A. ***** The Ohio State University 1976 f Reading Committee: Approved by Bruce W. Marion Thomas T. Stout Dennis R. Henderson Leroy J. Hushak Adviser Department of Agricultural Economics & Rural Sociology ABSTRACT The sCudy examines Che Implications of publishing comparative price information in a metropolitan retail food market. Changes In the range of prices between stores, the amount of price variation within stores, and weekly average price levels were monitored in both test and control markets. Similarly, measures of consumer satisfac­ tion with product and store characteristics were monitored over time as test market consumers were subjected to additional price informa­ tion. The results of the experiment revealed statistically significant declines in price levels and in price variations subsequent to the introduction and publication of comparative price information. Con­ sumer satisfaction levels in the test market were significantly dif­ ferent (higher), after receiving additional information, than their control market counterparts who were not subjected to the experimental stimulus. The study generates several implications for those con­ cerned about market performance and the role of information in con­ temporary settings. ii ACKNOWLEDGEMENTS In preparation of this dissertation I am indebted to many people for motivation and guidance. I am particularly grateful to Dr. Bruce W. Marion and to Dr. Thomas T. Stout for their personal interest in my research, my career, and in my family. Thank you very much, gentlemen. I am Indebted to Dr. Dennis R. Henderson and Dr. Leroy J. Hushak for their valuable suggestions and explanations regarding numerous theoretical and analytical problems. X vould also like to thank Mrs. A.F.W. Plumptre and the staff of the Food Prices Review Board for both making the research possible and for collecting, producing, and publishing price and consumer data. To my typists Mrs. M. Jamieson, Mrs. M. Pearson, and Miss C. Wheten, my sincere thankB for editing, managing and preparing the manuscript. To my wife, Chantal, and to Michelle, Monique, and David - thank you for being there every time I needed encouragement. To my parents, may I summarize my affection and appreciation with the following philosophy: What you get depends upon what you do. What you do depends upon who you are. Who you are depends upon how you are raised. iii VITA July 5, 1944 Born - Regina, Sa skatchewan, Canada 1967 .... B. Sc., University of Saskatchewan, Saskatoon, Saskatbhewan. 1968 . Executive Assistant, Canada Agriculture, Ottawa, Ontario. 1969 - 1970 Research Associate, The University of Alberta, Edmonton, Alberta, 1969 . M.Sc., The University of Alberta, Edmonton, Alberta. 1970 . M.B.A., The University of Alberta, Edmonton, Alberta. 1970 - 1972 Marketing Specialist, Agriculture Canada, Ottawa, Ontario. 1972 - 1974 Research Associate, The Ohio State University, Columbus, Ohio. 1975 . Associate Frofessbr, The University of Saskatchewan, Saskatoon, Saskat chewan. PUBLICATIO]US "An Empirical Study of Metropolitan Ma rket Conduct in Food Retailing," Canadian Journal of Agricultural Econ amics XVIII, No. 2, 1970, pp. 41-51. "Implications of Improved Information On Market Performance," The Journal of Consumer Affairs, Vol. 6, :k>. 2, 1972, pp. 184-197. "Industrial Organization and Policy Deivelopment in a Dynamic World," Canadian Journal of Agricultural EconoimicB XVII. No. 2, 1969, pp. 106-117. "Project 75...Trying to Make a Complex System Responsive to Real Demands," Agrologist. Vol. 1/3, May/June, 1972. iv FIELDS OF STUDY Major Field: Agricultural Economics Studies in Economic Theory. Professor L.J. Hushak, Pro­ fessor T. Koizumi, and Professor K.J. Kopecky. Studies in Econometrics and Research Methodology. Professor J.S. Cunningham, Professor F.E. Walker, Professor S. Relmer, and Professor T.T. Stout. Stuides in Industrial Organization. Professor D.R. Hender­ son, Professor B.W. Marion, and Professor D.O. Parsons. Studies in Marketing. Professor A.W. Cullman, Professor J. Bartels, Professor R.D. Blackwell, Professor J. Ginter, Professor B.J. Lalonde, and Professor W.T. Talarzyk. v TABLE OF CONTENTS Page ABSTRACT ii ACKNOWLEDGEMENTS ill VITA iv LIST OF TABLES lx LIST OF FIGURES xii Chapter I. INTRODUCTION 1 The Problem Characteristics of Food Retailing Objectives of the Study The Research Setting Scope of the Dissertation II. THEORETICAL DEVELOPMENT 10 Influence of Product and Market Characteristics Buyer Search Search By Different Types of Consumers The Interrelationships Between Information and Market Structure Effect of Information on Market Conduct Effect of Information on Market Performance Study Hypotheses Welfare Measures III. RESEARCH DESIGN Overview Pretest-Post Test Control Group Design The Selection of Markets and Stores The Market Basket The Price Index Formulation of Price Variances Measurements of Consumer Satisfaction Collection and Dissemination of Price Information The Consumer Questionnaire Sampling Procedure Limitations of the Study vi IV. RETAIL PRICE BEHAVIOR 64 Pretest Price Behavior Post Information Price Behavior Analysis of Major Implications A Review of Firm Strategies Additional Findings An Empirical Measure of Social Benefits V. CONSUMER BEHAVIOR.................................... 97 Pre-Information Results In The Test Market Consumers Satisfaction In General Consumer Satisfaction With Specific Food Products and Store Characteristics Analysis of Major Implications Pre-Information Results In The Control Market Consumer Satisfaction In General Consumer Satisfaction With Specific Food Products and Store Characteristics Analysis of Major Implications Post Information Results General Post Test Comparisons: Ottawa-Hull versus Winnipeg Perceived Measures of Social Benefit VI. SUMMARY, CONCLUSIONS, IMPLICATIONS AND RECOMMENDATIONS 129 The Setting Summary of Findings Conclusions Implications Selected Recommendations APPENDIX A .......................................................... 153 B ............ 157 C.......................................................... 159 D .................................................... 181 E .............................................. 209 F ............ 212 vii G........................... 214 H. ..................................................... 229 X ............................... 231 J .......................................................... 245 BIBLIOGRAPHY .................................................. 248 vili LIST OF TABLES TABLE PAGE 1. An Example of the Press Release on Store Price Compari­ sons, Ottawa-Hull, September, 1974. 55 2 . An Example of the Press Release on Product Price Compari­ sons, Ottawa-Hull, September, 1974. 57 3. Average Weekly Store Price Index Levels for all Stores, Ottawa-Hull and Winnipeg Plus High-Low Extremes for Ottawa-Hull, 1974. 66 4. Analysis of Variance of Retail Food Price Index Levels for all Stores over Selected Time Periods Ottawa-Hull,