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Bill to end ‘item pricing’ introduced in Michigan

Bill to end ‘item pricing’ introduced in Michigan. January 27, 2011 The Associated Press. http://www.bloomberg.com/news/2011-01-27/bill-to-end-item-pricing-introduced-in-michigan.html. The Latest.

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Bill to end ‘item pricing’ introduced in Michigan

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  1. Bill to end ‘item pricing’ introduced in Michigan January 27, 2011 The Associated Press http://www.bloomberg.com/news/2011-01-27/bill-to-end-item-pricing-introduced-in-michigan.html

  2. The Latest • In his State of the State address, Governor Rick Snyder proposed repealing Michigan’s law requiring price tags on most retail items • A week later, the legislation to repeal was introduced by Republican Rep. Lisa Posthumus Lyons of Alto • The Michigan Retailers Association says the law is a hidden tax on consumers, and results in higher prices in stores • The United Food and Commercial Workers union argues that jobs would be lost in grocery stores if the law were to be repealed

  3. Outmoded Consumer Protection: The Incompatibility of Item Pricing Laws and Radio Frequency Identification October 12, 2010 By David Wyld, Southeastern Louisiana University http://www.bukisa.com/articles/372597_outmoded-consumer-protection-the-incompatibility-of-item-pricing-laws-and-radio-frequency-identification

  4. Why are there IPLs? • Item pricing laws were enacted the 1970’s and 80’s to protect consumers from being overcharged due to scanning errors • IPLs are supported by consumer advocates, and now by workers’ unions, who believe that the repeal would threaten jobs • IPLs currently exist in ten US states; Michigan’s, which includes non-food items, is one of the most stringent.

  5. Arguments Against • Retailers argue that the costs of compliance, and high fines for non-compliance, translate to increased costs for the consumer – a hidden tax. • Researchers found that prices in markets subject to IPLs were between 20-25 cents higher than prices for similar items in other markets • IPLs impede large retailers’ abilities to change prices. • There are further advances in item-pricing, like Radio Frequency Identification, that current Michigan law makes impossible to utilize.

  6. Effects of IPLs? • With the increased costs associated with IPLs, supply has decreased, leading to higher prices and lower quantities. Supply, with tax Price ($) Demand Supply, original Supply, better technology P w/ tax • The Governor believes that repealing Michigan’s IPL will not only get us back to the original supply levels, but give retailers a chance to use better technology. P* P w/ tech Quantity Q w/ tax Q* Q w/ tech

  7. Assumption: Tax Burden • But does the tax burden really fall on the consumer? • That depends on the elasticity of demand and supply curves; different kinds of goods have different curves. Supply, with tax Price ($) Demand Supply, original P w/ tax Consumer incidence Tax P* Producer incidence • When the demand and supply curves have similar elasticities, the burden is shared. Quantity Q w/ tax Q*

  8. Tax Burden Supply, with tax • When the demand curve is elastic and supply is inelastic, Price ($) Supply, original Consumer incidence Demand P w/ tax P* Producer incidence most of the burden goes to the producer. Tax Quantity Q w/ tax Q*

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