Cost of Being Poor: Retail Price and Consumer Price Search Differences across Inner-City and Suburban Neighborhoods

This research undertakes a carefully designed and detailed empirical study to gain insights into (1) the extent of price differentials between wealthy and poor neighborhoods; (2) what induces such differentials, especially the nature and intensity of competitive environments, including mass merchandisers like Wal-Mart; and (3) their relative impacts. It finds a price differential of about 10%-15% for everyday items. Even after controlling for store size and competition, prices are found to be 2%-5% higher in poor areas. It also finds that it is not the poverty level per se but access to cars that acts as a key determinant of consumers' price search patterns.