Study Finds Israel's 'Basket of Goods' Program Lowers Some Prices but Raises Others, Undermining Savings

A pioneering study by the Coller School of Management at Tel Aviv University evaluated the impact of Israel's "Basket of Goods" program about two months after its implementation. The research revealed that while the program significantly reduced prices of designated basket products, it simultaneously caused price increases in other items, potentially negating consumer savings.

The study, conducted by Prof. Itay Atar, Adi Omer from Tel Aviv University, and Dr. Or Avishi-Rizi from Pompeu Fabra University in Barcelona, analyzed daily price data from Pricez, covering approximately 70 supermarket sub-chains and over 2,000 branches across Israel during the program's first seven weeks. Results showed a 35% price drop for basket products at participating Carrefour stores and a 37% decrease on Carrefour's online platform. However, outside Carrefour, price reductions were limited, with no significant drops across all food chains and only about a 3% average decrease in major discount chains.

Concurrently, the study identified price hikes in non-basket products. At Carrefour physical stores, 46 of 76 product categories saw price increases, 23 of which were statistically significant; online, 55 categories increased, with 31 statistically significant. Additionally, 86 popular non-basket products rose in price by about 1.5% in stores and 2% online. The research also found that major supermarket chains set prices nationally rather than competing locally around participating branches.

Prof. Atar commented, "The program succeeded in lowering basket product prices at Carrefour and somewhat influenced competitors, but in economics, there are no free gifts." He emphasized that while consumers saved on basket items, they paid more for others, suggesting the overall shopping bill might not have decreased. "The true test is the total checkout amount, and in this respect, the effort to reduce the shopping cart cost may have backfired."