If someone told me that U.S. retailers are more price competitive than Canadian retailers, and that they offer a cushier package of services and perks in their retailing, I would have assumed they were just operating under some vague stereotypes that somehow fits with generalizations of Canadian/U.S. cultural difference. In the U.S. we are results oriented, cut-throat, and professional consumers. Pregnant mothers in labor make take-it-or-leave-it offers hospitals, we want free choice and market competition in everything from prisons to adoptions. In Canada they like things a little slower, a little softer, and need to be gently coaxed into spending their hard earned loonies. “Now explain to me again how this replaces my VCR, eh?” They are comfortable with a mixed economy in everything. Every year the prime minister decides which brands of HDTVs can be sold; so far he has chosen none, ‘Canada is not ready’ he rightly says.

This article from the Vancouver Sun suggests that this stereotype (of mine) may in fact be correct:

…goods are cheaper in the U.S.

That may be in part because there is more competition in the U.S., which is larger. But the main difference is the type of competition traditionally found in the two countries.

In Canada there has been more emphasis on service and a pleasant retail environment, Brander said.

“Price isn’t everything.”

In the U.S. the focus has been largely on price, not service. But that’s changing.

“In Canada we have been getting more and more Americanized in our retailer culture thanks to places like Walmart,” Brander said.

And as that culture continues to make inroads into Canada, prices will continue to converge.

The author of the piece cites cultural reasons and the number of competitors, but I wonder if something else isn’t at work. In the U.S., antitrust is often concerned with agreements that allow manufacturers to set minimum retailer prices, or make exclusive deals with retailers and distributors that prevent other manufacturers from competing, or other vertical restraints that could inhibit competition and reduce consumer welfare. One economic justification for restraints like these is that they allow retailers to offer better sales services for the manufacturers goods, which other retailers cannot free-ride on and undercut them on prices. For example, Store A will tell you everything you need to know about Sony HDTVs (unless you’re in Canada), and then you’ll go and buy them in Store B which has no sales staff to give you information, but is thus able to charge lower prices. By setting a minimum price for their TVs in each store, Sony is able to prevent Store B from undercutting store A, so that both will offer sales services, which Sony prefers.

Does Canadian antitrust have similar concerns with vertical restraints? If they are more lenient with vertical restraints, then that might create a retail environment with less price competition and more services.

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