A price takes the form of a cost for either one unit (single-unit pricing) or multiple units (multi-unit pricing). I consider a monopolist selling units of a good to a population of homogeneous consumers to explain why one is preferred to the other. A mental cost arises if the division problem a multi-unit price causes is done. If marginal utility remains high multiple units are desired. Multi-unit pricing is preferred since it creates a cost if fewer units are purchased. If utility exhibits strong diminishing returns single-unit pricing is used to avoid the calculation. Copyright © 2008 John Wiley & Sons, Ltd.
Volume (Year): 30 (2009)
Issue (Month): 2 ()
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References listed on IDEAS
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- Russell, Thomas & Thaler, Richard, 1985. "The Relevance of Quasi Rationality in Competitive Markets," American Economic Review, American Economic Association, vol. 75(5), pages 1071-1082, December.
- Kaushik Basu, 2004.
"Consumer Cognition and Pricing in the 9's in Oligopolistic Markets,"
Harvard Institute of Economic Research Working Papers
2053, Harvard - Institute of Economic Research.
- Basu, Kaushik, 2004. "Consumer Cognition and Pricing in the 9's in Oligopolistic Markets," Working Papers 04-04, Cornell University, Center for Analytic Economics.
- John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
- Basu, Kaushik, 1997. "Why are so many goods priced to end in nine? And why this practice hurts the producers," Economics Letters, Elsevier, vol. 54(1), pages 41-44, January.
- Conlisk, John, 1988. "Optimization cost," Journal of Economic Behavior & Organization, Elsevier, vol. 9(3), pages 213-228, April. Full references (including those not matched with items on IDEAS)
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