Improving Pricing Accuracy at the Supermarket: Electronic Shelving Systems and Public Policy Ronald C. Goodstein and Jennifer Edson Escalas Recent government inquiries, media reports, and academic studies have focused consumers' and public policymakers' attention on the issue of scanner pricing inaccuracy. The authors focus on what can and is being done in response to this problem. They review the legal, regulatory, and legislative response to scanner pricing inaccuracies and report the results of a study that empirically examines the efficiency of one strategy being used by legislators and retailers in reaction to the scanner accuracy issue, namely, electronic shelving systems ( ESS). The results of actual purchases are used to calculate error rates and reveal that both overring and underring rates are significantly lower for stores employing scanner systems and ESS than those employing scanners alone. T he first scanner capable of reading Universal Product Codes (UPCs) was installed in a supermarket in Troy, Ohio in 1974 (Greenfield 1992). Less than 15 years later, approximately 95% of all mass merchandisers and su- permarkets in the United States employed scanner systems (Chain Store Age Executive 1990). That number is even higher today, because scanner systems are present in virtu- ally all medium- to large-sized mass merchandise and de- partment stores, as well as in grocery and supermarket out- lets (Chain Store Age Executive 1993a). Several factors are likely to have influenced the quick and widespread adoption of these systems. These include the rel- ative advantage that scanners offer over traditional pricing methods and their compatibility with store inventory and pricing systems-two factors shown to speed the diffusion process (cf. Midgley 1986). The elimination of pricing indi- vidual items has netted retailers substantial profits (Cutler and Rowe 1990). Additionally, scanning greatly simplifies pricing for store management, because price changes are handled by simply changing the computer and shelf tags. Along with adoption of these technologically advanced systems came concerns from the public sector. Consumers expressed concern that these new systems might not work to their benefit, especially in terms of pricing accuracy (Harris and Mills 1980, 1982). Consumer protection groups de- manded that industries employing scanner systems respond to these concerns in some tangible manner. Industry person- nel, assuring customers that their fears were unwarranted, stressed the advantages that consumers obtained from the system, such as faster checkout and more accurate receipts, without ever addressing the consumers' concerns by direct- ly testing pricing accuracy. With time, the debate over pricing accuracy subsided as scanners became the modus operandi for many businesses, RONALD c. GOODSTEIN is Visiting Assistant Professor of Market- ing, The Wharton School, University of Pennsylvania. JENNIFER EDSON EscALAS is a doctoral candidate, Fuqua School of Business, Duke University. The authors thank Hal Kassarjian for his invalu- able feedback throughout the research process. They also thank the JPP&M reviewers and editor for their helpful comments. particularly in the grocery industry (Garland 1992). Most checks of pricing accuracy were limited to county and local authorities bringing suits against retailers for pricing over- charges (e.g., Trager 1992). More recently, both academic and mass media researchers have begun to reexamine this debate. In general, the findings tend to support consumers' original concerns that scanner pricing leads to higher levels of inaccuracy than traditional, hand-rung pricing systems (e.g., Goodstein 1994; O'Connell 1993). Because many of the studies have been conducted by media news programs, retailers have suffered from the negative publicity. The pricing accuracy issue is also being reexamined by the U.S. government. In fact, the National Institute of Stan- dards and Technology (NIST) recently formed an advisory board to formulate policy and guidelines that grocers must follow to ensure UPC pricing accuracy. The board was es- tablished in response to "nationwide public concern about price accuracy in retail stores" (NIST 1993, p. 5). Although policy recommendations will eventually pertain to all users of UPC-related technologies, the board's immediate concern is directed toward the nation's supermarkets. We present a public policy perspective on the scanner pricing accuracy issue. Our purpose is to highlight the pub- lic policy and legal implications of scanner overcharges and offer a potential solution for resolving this problem. In the process of this discussion, we review the findings concern- ing the pricing accuracy of scanner systems. Next, we dis- cuss the response to scanner inaccuracy, reviewing several legal cases and regulatory and legislative action to illustrate the risk faced by retailers using their scanner systems inef- fectively, and then we suggest methods to correct it. We then report the results of an empirical study assessing the effec- tiveness of electronic shelving systems (ESS) in eliminating pricing errors. Finally, we discuss the public policy implica- tions of our results. History of Scanner Pricing Research In 1971, the Grocery Industry's Ad Hoc Committee on Uni- versal Product Coding recommended that grocers adopt the UPC scanning system to provide a standardized method for identifying products by manufacturer and product type (Cal- ifornia Assembly Office of Research 1977, p. 8). By 1990, 216 Journal of Public Policy & Marketing Vol. 14 (2) Fall 1995, 216-224