Reasons for High Food Prices in Small Market Areas: The Case of the Åland Islands.

This article presents reasons for high food prices in small market areas. The starting point of this study is the knowledge that the price of food in the Åland Islands, a small archipelago between Finland and Sweden, is significantly higher than in continental Finland. It is also known that store-level economies of scale in grocery retailing mean that the structure of a small market is, even in the best case, either inefficient or uncompetitive. The article compares the price level of stores in Åland and Finland. High prices in Åland arise from a small average store size, high concentration in both the retailing and the food processing sector, border taxes and transportation costs.

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