Pricing and Packaging: The Case of Marijuana
AbstractIn many markets unit prices decline as the quantity purchased rises, a phenomenon which can be considered to be part of the economics of packaging. For example, in Australia marijuana costs as much as 80 percent less if purchased in the form of ounces rather than grams. This paper reviews the economic foundations of quantity discounts and proposes new ways of measuring and analysing them. These ideas are implemented with the prices of marijuana, a product that is shown to be priced in a manner not too different to that used for groceries and other illicit drugs. In broad terms, the results support the following pricing rule: The unit price falls by 2.5 percent when the product size increases by 10 percent.
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Bibliographic InfoPaper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 04-03.
Length: 56 pages
Date of creation: 2004
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- Clements, Kenneth W., 2003.
"Three Facts About Marijuana Prices,"
2003 Conference (47th), February 12-14, 2003, Fremantle, Australia
57846, Australian Agricultural and Resource Economics Society.
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- Kenneth W. Clements, 2002. "Three Facts About Marijuana Prices," Economics Discussion / Working Papers 02-10, The University of Western Australia, Department of Economics.
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2011-ECO-02, IESEG School of Management.
- 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, vol. 226(3), pages 646-657.
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