GMAT Verbal Reasoning Practice Test 1

Some supermarket retailers offer “everyday low prices” across a wide assortment of product categories, while others offer temporary deep discounts in a smaller group of categories. The former strategy is commonly known as “EDLP”, the
latter as “HILO”. One question that arises is whether these different pricing formats are more or less attractive to different types of shoppers. Shoppers can be defined (in a relative sense) as either large- or small-basket shoppers: largebasket
shoppers shop less frequently and purchase across many more product categories on a single visit than do small-basket shoppers. Thus, large-basket shoppers are likely to be more captive to prices across many categories and have less
flexibility to take advantage of occasional price discounts. Bell and Lattin predict that, in comparison to small-basket shoppers, large-basket shoppers will be less influenced by the expected price of an entire basket of goods – which these
shoppers presume to be lower at an EDLP store. Meanwhile, small-basket shoppers, who shop more frequently and thus have more flexibility, can often defer purchases of items when the items are priced high, because the shoppers know
they will soon return to the store. Bell and Lattin speculate that a supermarket whose format offers greater variability in price might thus tend to attract small-basket shoppers.