This document summarizes a study of pricing differences for identical goods at computer shops in Sim Lim Square. Researchers disguised as shoppers collected price data from multiple shops and found that identical goods were priced differently. They analyzed the market structure using the Bertrand model of competition, which suggests shops compete on price. Their findings imply shops are not colluding and prices may decrease over time as shops lower prices. Consumers have imperfect information, so shops nearer elevators can charge more, knowing shoppers' search costs increase further away. The conclusion recommends buying from shops further from elevators to find cheaper products.

1. How and Why Identical Goods Are
Priced Differently: Sim Lim Square
– A Case Study
Melissa Lorraine Chua Jialing
Goh Shou Xian
Goh Yong Min
Charlene Soh Yan Ling
Joshua Wong Weng Yew
Vincent Fu Jing Cai (MIA)

2. How and Why Identical Goods Are
Priced Differently: Sim Lim Square
– A Case Study
Melissa Lorraine Chua Jialing
Goh Shou Xian
Goh Yong Min
Charlene Soh Yan Ling
Joshua Wong Weng Yew
Vincent Fu Jing Cai (MIA)

3. Introduction
• We spend a lot of our time on our
computers
• Fast changing technology
• We want to help you make better
buying decisions when you shop for
computers

4. Price Detectives
• We went down to Sim
Lim Square disguised
as computer shoppers
• Formed a shopping
list
• Asked 3 shops on
each of the two levels
selling computers (4 &
5) for their prices

5. Findings

6. Limitations

7. Market structure
Expected to be perfect competition
Anomaly: Charging different prices
Bundling products
Distance from elevators

8. Why we used the Bertrand Model to
understand shops’ pricing
Goods involved are identical,
homogeneous
Shops have different prices and
compete solely on prices

9. The Bertrand Model of shops
P1 & P2 = Prices of 2 shops
45 degree line = Prices in
which 2 shops are equal
P1(P2) = Reaction function
of Shop 1

10. Implications from our study
Shops are not in collusion (They sell
at different prices)
Different prices imply that they are
in a process of lowering prices
Consumers may have imperfect
information on prices

11. Search Theory
We only search for a lower price
when the expected average benefit
(saving) is more than the cost.
Costs of searching
Benefits of searching
Firms nearer the elevators know
this…

13. And So...

14. Conclusion

15. Conclusion
If you want to buy cheaper
products from Sim Lim Square,
go to shops

16. Conclusion
If you want to buy cheaper
products from Sim Lim Square,
go to shops
further away from
the elevators.

17. Thank
You
Q&A