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Pricing and Packaging: The Case of Marijuana

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  • Kenneth W. Clements

    (University of Western Australia)

Abstract

In many markets, unit prices decline as the quantity purchased rises, a phenomenon that can be considered part of the economics of packaging. This article reviews the economic foundations of quantity discounts and proposes new ways of measuring and analyzing them. These ideas are implemented with the prices of marijuana, a product that is shown to be priced in a manner not too different from that used for groceries as well as some other illicit drugs. In broad terms, the results support the following pricing rule: the unit price falls by 2.5% when the package size increases by 10%.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 79 (2006)
Issue (Month): 4 (July)
Pages: 2019-2044

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Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:4:p:2019-2044

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Web page: http://www.journals.uchicago.edu/JB/

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  1. Clements, Kenneth W & Izan, H Y, 1987. "The Measurement of Inflation: A Stochastic Approach," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 5(3), pages 339-50, July.
  2. Clements, Kenneth W., 2004. "Three facts about marijuana prices," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, Australian Agricultural and Resource Economics Society, vol. 48(2), June.
  3. Gerstner, Eitan & Hess, James D, 1987. "Why Do Hot Dogs Come in Packs of 10 and Buns in 8s or 12s? A Demand-Side Investigation," The Journal of Business, University of Chicago Press, University of Chicago Press, vol. 60(4), pages 491-517, October.
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Cited by:
  1. Ben Lakhdar, Christian & Leleu, Hervé & Vaillant, Nicolas Gérard & Wolff, François-Charles, 2013. "Efficiency of purchasing and selling agents in markets with quality uncertainty: The case of illicit drug transactions," European Journal of Operational Research, Elsevier, Elsevier, vol. 226(3), pages 646-657.

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