Upscale items and services are generally cheaper in NYC:
In a high-income city like New York, grocery costs are 20 percent lower for high-income people than they are in a low-income city like New Orleans (whereas costs are about 20 percent higher for low-income people in the rich city than the poor city). That’s because there’s a very high concentration of highly skilled people here, so there are a lot of vendors competing for the business of those high-income people, effectively lowering costs and increasing the variety of products that appeal to this consumer group.
Professor Handbury looked specifically at food, but she said that for most things you buy, there are probably positive externalities that come from living around a lot of people who have tastes similar to yours.
Catherine Rampell’s NYT magazine article goes into more detail:
Part of the reason high-income residents get good deals, Handbury explains, results from a particular economic system. Highly educated, high-income New Yorkers are surrounded by equally well-educated and well-paid people with similar tastes. More vendors compete for their business, which effectively lowers prices and provides variety. There’s also a high fixed cost to distributing a niche product to an area; if there’s more demand for that product, then the fixed cost can be spread across more customers, which will justify bringing the product to the market in the first place. That’s why companies go through the expensive hassle of distributing, say, St. Dalfour French fruit spreads in rich cities but not in poor ones and why New York can support institutions like the Metropolitan Opera.
