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.
Aalto-Setälä, V., Kinnunen, J. and Koistinen, K. (2004) ‘Reasons for High Food Prices in Small Market Areas: The Case of the Åland Islands’, Agribusiness, 20(1), pp. 17–29. doi: 10.1002/agr.10083.