Why Are the Prices the Same?

14 Aug

From https://www.walmart.com/tp/kellogg-cereals

From https://www.walmart.com/browse/food/ice-cream/hagen-dazs/976759_976791_9551235_5459614/

Many times within a narrow product category like breakfast cereals, ice cream tubs, etc., the prices of different varieties within a brand are the same. The same pattern continues in many ice cream stores where you are charged for the quantity instead of the flavor or the vessel in which ice cream is served. It is unlikely that input costs are the same across varieties. So what explains it? It could be that the prices are the same because the differences in production costs are negligible. Or it could be that retailers opt for uniform pricing because of managerial overhead (see also this paper). Or there could be behavioral reasons. Consumers may shop in a price-conscious manner if the prices are different and may buy less. 

Breakfast cereals have another nuance. As you can see in the graphic above, the weight of the ‘family size’ box (which has the same size and shape) varies. It may be because there are strong incentives to keep the box size the same. This in turn may be because of stocking convenience or behavioral reasons, e.g., consumers may think they are judging between commensurate goods if the boxes are the same size. (It could also be that consumers pay for volume not weight.)