Sales, Quantity Surcharge, and Consumer Inattention
AbstractQuantity surcharges occur when firms market a product in two sizes and offer a promotion on the small size: the large size then costs more per unit than the small one. When quantity surcharges occur the sales of the large size decrease only slightly despite the fact that the small size is a cheaper option - a clear arbitrage opportunity. This behavior is consistent with the notion of rationally inattentive consumers that has been developed in models of information frictions. We discuss implications for consumer decision making, demand estimation, and firm pricing.
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Bibliographic InfoPaper provided by University of Cyprus Department of Economics in its series University of Cyprus Working Papers in Economics with number 07-2010.
Length: 31 pages
Date of creation: Nov 2010
Date of revision:
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Web page: http://www.econ.ucy.ac.cy
quantity surcharge; sales; promotions; consumer inattention; quantity discounts; nonlinear pricing.;
Other versions of this item:
- Sofronis Clerides & Pascal Courty, 2010. "Sales, Quantity Surcharge, and Consumer Inattention," Working Paper Series 32_10, The Rimini Centre for Economic Analysis.
- Clerides, Sofronis & Courty, Pascal, 2010. "Sales, Quantity Surcharge, and Consumer Inattention," CEPR Discussion Papers 8115, C.E.P.R. Discussion Papers.
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- D4 - Microeconomics - - Market Structure and Pricing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-11 (All new papers)
- NEP-COM-2010-12-11 (Industrial Competition)
- NEP-MKT-2010-12-11 (Marketing)
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