Amazon has been a pioneer in developing cashierless technology in retail stores. In Amazon Go supermarkets, sensors detect which products shoppers have put in their baskets and charge the shoppers’ credit cards as they leave the store. Eliminating checkout lines significantly reduces the cost of operating these supermarkets.
a. Assume that eventually all supermarkets use cashierless technology. Use a demand and supply graph of the market for groceries to show the effect of these falling costs on consumer surplus in this market.
b. Can we be certain whether these falling costs will increase producer surplus? Briefly explain.