Oil prices are falling (hooray) but other products aren't following suit. The high cost of groceries and other personal necessities like toothpaste are still in tact even though the initial hike was blamed on oil. Steady prices that exist without the explanatory rationale are called sticky prices. Competitive juices are needed to get these sticky prices to budge. Lars Perner of the University of Southern California's Marshall School of Business explains, "As soon as the first [company] in a category reduces prices, the others will follow suit. But they're all hoping the other one doesn't."
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Definition: Sticky Prices
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i think that we'll see a change in this philosophy soon enough though. with Q3 earnings and losses being reported this week and in the near future, we'll probably see that companies are falling short of estimates and therefore will start to drop prices. yes people always need to eat, but i think that if you price things too high, you'll find that people won't buy the same products.
1ilanac--exactly! I've recently noticed a lot more people doing their grocery shopping at Aldi (it's a discount grocery store that only sells generic products) because the prices are so very much cheaper than any grocery store around us. Maybe that will inspire some food manufacturers to lower their prices.
2My parents stopped shopping at the store they normally shop at and now go to WalMart. They've been saving $50/week.
3We were actually talking about this at work yesterday. Everyone in the office were saying that food prices had to fall, and I steadfastly disagreed saying exactly what is defined to be sticky prices even though I didn't know the techinical name. It's sad that I may have been right though, I wish I was wrong.
4I agree with ilanac. They will have to lower their prices at some point. And, I have started buying off brand everything. I just can not afford to buy the stuff I normally would, and I'll be honest the dollar store is like my new favorite place for dry food items!
5When food companies start to see an opportunity to squeeze, they tend to leave the price the same and decrease the product's weight, volume, ounces. So a bag of chips a $3.29 used to weight 9 oz, now weighs 7.5 oz. I wouldn't be surprised if they reduced the price, and reduced the size at the same time to make the public perceive a lower unit price, but the price per ounce remains the same.
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