Marketing

PRICE DIFFERENCES IN A EUROPEAN SINGLE MARKET – AND HOW TO MEASURE THEM?

Ville AALTO–SETÄLÄ♣

University of Helsinki and National Consumer Research Centre, Finland University of Helsinki, PO Box 56, 00014 Helsinki, Finland email: ville.aalto–setala@helsinki.fi

Executive Summary

A significant objective of European integration is to form a unified market where goods and services move freely. Several studies have shown, however, that there are substantial price differences between countries. Price differences are regarded as an indication of the non– functioning of the single market – trade between countries should eliminate or at least decrease price differences. This paper focuses on the price differences of food products in Helsinki and Tallinn. This is only one example of the functioning of the internal market within EU, but it has several interesting special features. Firstly, Helsinki and Tallinn are close to each other and people move a great deal between the two cities. Secondly, we know that the price differences between Finland and Estonia are substantial. Thirdly, Finnish retail groups have a significant position in the Estonian daily consumer goods market. Thus, we can look at the price of the same product marketed by the same company in two countries with notably different price levels. Lastly, the study provides an interesting case in a sense of price level measurement between countries. The results of the study further strengthen the notion of substantial differences in the prices of food products in Estonia and Finland. However, the price differences vary a great deal between food products. Finnish brands cost 12% less in Estonia than in Finland. Products of Estonian origin are, on an average, as much as 44% less expensive in Estonia than similar products of Finnish origin in

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The author thanks Marja Nygren from Finnish Consumer Authority and Kristina Vaksmaa from European Consumer Centre of Estonia for the data collection process. This...