There is a book called The Undercover Economist that explains how this works. The author is Tim Harford...good guy
The price of comparable Tropicana Orange Juice is about the same (let's say $2.50). Krogers then sells a cheap version, like 5-Alive for $2.00. Publix sells an upscale version for $3.00.
Because Publix doesn't sell the cheap alternative, people think the prices are higher. But like in most cases, people are dumb as shit because they don't compare apples to apples.
People are likely to pay .50 more or so for a superior good. The overhead of a carton of OJ is about the same whether it is 5-alive brand or $3 per 1/2 gallon brand.
Publix also doesn't market itself as a low-cost competitor. It is about service there. For instance, they have a cart of shit they don't even sell but customers request. Say customers request for something that Kroger's sells. They will go over and buy it and sell it to you at the same price they paid. Then you can get all your shopping done in one place.
Because it is percieved to be upscale, people spend more time in the store. You don't have a bunch of welfare moms with 50 kids in tow screaming at the top of their lungs. They don't shop there because they think it is more expensive.
They are selling high margin items at good volume. Plus they are a private company so they can distribute returns to the employers rather than shareholders.
