The Likely Effects of Price Increases on Commissary Patronage: A Review of the Literature

• Published in: Policy File 2015
• Main Authors: Bond, Craig, Pollak, Julia, Rostker, Bernard D, Yoon, Cate
• Format: Report
• Language: English
• Subjects: Consumers; RAND Corporation

To determine the likely effects of increased commissary prices, should the annual taxpayer subsidy to the Defense Commissary Agency (DeCA) be reduced, this report reviews how price changes have affected grocery retailers in the private sector through changes in store choice and analyzes how these results might translate into changes in sales and revenues within the commissary system. Prior research from the private sector suggests that commissary consumers are likely to be relatively responsive to price changes, so price increases should be expected to result in both decreased commissary unit sales and decreased revenues. Raising overall price levels will likely not be a successful strategy to cover shortfalls in costs caused by the elimination of the annual U.S. Department of Defense appropriation. Commissary patrons will see their grocery bills increase, though not by the full amount of the price increase if they substitute non-grocery goods and services and/or alternative retailers of groceries. In addition, changes in commissary pricing may have negative secondary and nonmarket effects, including effects on retention and recruitment; reductions in contributions to Morale, Well-Being, and Recreation programs; possible demand reductions for military exchanges; and changes in the calculated cost of living adjustment. The report also provides a strategy for gathering the information needed to estimate the relevant effects of a price increase on the activities of DeCA with greater precision.