New Study from UC San Diego Refutes Surge Pricing Claims in Supermarkets

In the midst of escalating political scrutiny regarding the potential for dynamic pricing in supermarkets, a recent study from the University of California, San Diego's Rady School of Management offers a surprising counter-narrative. Co-authored by Robert Sanders, an associate professor of marketing and analytics, and Ioannis Stamatopoulos, an associate professor at the University of Texas at Austin, the research concludes that electronic shelf labels (ESLs)—digital devices replacing traditional price tags—have not contributed to surge pricing in grocery stores. Published on July 22, 2025, the study analyzes over 180 million product observations across 114 stores in four states, revealing that fears of price gouging linked to ESLs are unfounded.

The research comes at a time when lawmakers such as Senators Elizabeth Warren and Bernie Sanders, alongside New York City mayoral candidate Zohran Mamdani, have raised alarms about surge pricing in grocery settings, likening it to price hikes seen in ride-sharing and airline industries. There has even been legislative action aimed at banning ESLs in states like Arizona and Rhode Island. However, the findings from UC San Diego suggest such concerns may be misplaced.

According to Sanders, "We empirically tested a claim that many prominent lawmakers have made, that electronic labels lead to price gouging. We find there is essentially no change in pricing behavior after these digital labels are installed." The research indicates that before the installation of ESLs, only one in every 20,000 products exhibited signs of price spikes, a figure that changed marginally to one in 200,000 after ESL implementation. This negligible increase signifies that ESLs do not facilitate real-time price gouging, contrary to popular belief.

The study also sheds light on the actual factors influencing grocery pricing. Base prices typically align with wholesale costs and competitive pricing, while short-term fluctuations are driven by pre-planned promotions rather than local demand dynamics. For example, marketing strategies such as 'buy one, get one free' deals are common tactics that do not correlate with dynamic pricing models.

Stamatopoulos further elaborates, stating, "Unlike Uber or hotels, grocery stores don't make money on a single item—they rely on customer loyalty and the overall basket of goods. Using surge pricing could alienate shoppers and drive them away permanently, which is the last thing grocers want." This sentiment underscores the importance of customer retention in the grocery industry, where profit margins are notoriously thin.

The implications of this study extend beyond pricing strategies. The researchers argue that ESL technology could help mitigate food waste by enabling dynamic discounts on products nearing expiration, thereby aiding low-income families while also addressing environmental concerns associated with food waste. Sanders notes, "Protecting consumers and ensuring competitive pricing is crucial. However, targeting digital shelf labels as a source of price gouging distracts from the real drivers of food costs."

In summary, the findings from UC San Diego's Rady School of Management challenge prevailing narratives around surge pricing in supermarkets, suggesting that fears surrounding ESLs are unfounded. As dynamic pricing technology becomes more prevalent, understanding its implications will be critical for both consumers and retailers. The study calls for a reevaluation of the discourse surrounding grocery pricing practices, urging stakeholders to focus on the actual drivers of cost rather than misattributing blame to technological advancements. This research not only provides clarity on a contentious issue but also highlights the need for further discussion on how pricing strategies can evolve responsibly in the grocery market.