Do Consumers Know How Much They Pay?

Do consumers know the exact prices they pay in grocery stores? The answer is no. In a survey of 560 shoppers in four Providence and Boston area supermarkets in July 1974, consumers were asked to state the price of 44 popular brand-name and nationally advertised items (Progressive Grocer, November 1974: 39). Only 24 percent of the shoppers tested knew the correct price (within 5 percent) of a specific product; the comparable figure for a similar study in 1963 was 32 percent.

The same is true in Great Britain (Gabor and Granger 1961). In a random sampling, housewives in Nottingham, England were asked to recall the prices they paid for seven common grocery items within the previous week. Any departure from the actual price was classified as incorrect. Across all social groups and all types of retail outlets, 57.0 percent of prices were accurate, 25.4 percent were wrong, and the rest were not known by the consumer. Thus, one-quarter of the housewives believed they knew the price but were wrong; and 4 out of 10 either did not know the price or gave the wrong one. The percent correct varied across commodities from 34.8 percent for breakfast cereal to 79.3 percent for tea.

Of those prices that were incorrect, 43.2 percent differed from the correct price by not more than 5 percent, roughly half too low and half too high. If the researchers had classified a price as correct if it were within 5 percent, then 73.1 percent of the price estimates would have been correct.

Accuracy declined as wealth or the number of items bought increased. The social group with the lowest percent correct was the well-to-do, and the second lowest was the professional middle class. Thus, consumers who spend a relatively small percent of their income on food are relatively less likely to know accurately the prices they paid.

SOURCE:

Gabor, André, and C.W.J. Granger. 1961. "On the Price Consciousness of Consumers." Applied Statistics 10:170-88.