Seventy-two percent of the members of the United Food and Commercial Workers Local 655 voted to strike against Stop ’n Shop in the St. Louis area. In fear of similar union responses, two of Stop ’n Shop’s larger rivals in the St. Louis market—Dierberg’s and Schnuck’s—decided to lock out its union employees. The actions of these supermarkets, not surprisingly, caused Local 655 union members to picket and boycott each of the supermarkets’ locations. While the manager of Mid Towne IGA—one of many smaller competing grocers—viewed the strike as unfortunate for both sides, he was quick to point out that the strike provided an opportunity for his store to increase market share. To take advantage of the strike, the manager of Mid Towne IGA increased newspaper advertising by pointing out that Mid Towne employed Local 655 union members and that it operated under a different contract than “other” grocers in the area. What is the expected impact of advertising on Mid Towne IGA (how will the equilibrium price and quantity change)? Equilibrium price: Equilibrium quantity: Identify the type of advertising in which Mid Towne IGA engaged. _____ advertising Do you believe the impact of advertising will be permanent? Yes - the strikes will likely have a permanent effect on Mid Towne IGA's demand. No - as contracts are renegotiated, demand will shift back to its original level.
Seventy-two percent of the members of the United Food and Commercial Workers Local 655 voted to strike against Stop ’n Shop in the St. Louis area. In fear of similar union responses, two of Stop ’n Shop’s larger rivals in the St. Louis market—Dierberg’s and Schnuck’s—decided to lock out its union employees. The actions of these supermarkets, not surprisingly, caused Local 655 union members to picket and boycott each of the supermarkets’ locations. While the manager of Mid Towne IGA—one of many smaller competing grocers—viewed the strike as unfortunate for both sides, he was quick to point out that the strike provided an opportunity for his store to increase market share. To take advantage of the strike, the manager of Mid Towne IGA increased newspaper advertising by pointing out that Mid Towne employed Local 655 union members and that it operated under a different contract than “other” grocers in the area.
What is the expected impact of advertising on Mid Towne IGA (how will the
Equilibrium price:
Equilibrium quantity:
Identify the type of advertising in which Mid Towne IGA engaged.
_____ advertising
Do you believe the impact of advertising will be permanent?
-
Yes - the strikes will likely have a permanent effect on Mid Towne IGA's demand.
-
No - as contracts are renegotiated, demand will shift back to its original level.
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