I've never been a believer that geographical location is a reason for stiffer competition between similar markets.
Rather, Economic Principles state that changes in income shifts the demand curve.
http://ecedweb.unomaha.edu/DEm_Sup/shifts.htm
Simply said, the more money you earn, the more you are willing to spend on the same item. With increased demand, the price of the item also increases. The diagram above shows the effects of the prices on a good as income increases.
The way I see it, if a store is pricing items too aggressively low or high, they will not be in business for long. From what I saw in between Toronto and Vancouver, the price difference between the 2 markets were very similiar to the income differences between the 2 cities. The items in Toronto were slightly higher by about 10-15%. Makes sense to me. What we see in the markets now is simply natural economic forces in play.
Of course, supply curves have an impact on price as well. So if there are too many suppliers, price will go down. I just don't think that Vancouver has abnormally that many more suppliers to make that much of a difference. That's why I think income makes a difference.