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Quantity Surcharges on Groceries

  • Agrawal, Jagdish
  • Grimm, Pamela E.
  • Srinivasan, Narasimhan
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    A quantity surcharge exists when the unit cost of a given brand is higher for a large-size package than for a smaller one. This paper examines some product and household characteristics that influence observed quantity surcharging practices. Results indicate that the propensity to buy a large-size package of a product is positively influenced by the extent of a household's usage of that product, procurement cost, and carrying capacity, and is negatively influenced by the propensity to price search. A retailer's decision to levy a quantity surcharge is, in turn, influenced by the demand for the product, the propensity to buy large-size packages, and to some extent the product's carrying cost.

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    File URL: http://purl.umn.edu/25179
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    Paper provided by University of Connecticut, Food Marketing Policy Center in its series Research Reports with number 25179.

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    Date of creation: 1994
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    Handle: RePEc:ags:uconnr:25179
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    Web page: http://www.fmpc.uconn.edu/
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    1. Goldman, Arieh & Johansson, J K, 1978. " Determinants of Search for Lower Prices: An Empirical Assessment of the Economics of Information Theory," Journal of Consumer Research, University of Chicago Press, vol. 5(3), pages 176-86, December.
    2. 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, vol. 60(4), pages 491-517, October.
    3. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
    4. Carlson, John A & Gieseke, Robert J, 1983. " Price Search in a Product Market," Journal of Consumer Research, University of Chicago Press, vol. 9(4), pages 357-65, March.
    5. Urbany, Joel E, 1986. " An Experimental Examination of the Economics of Information," Journal of Consumer Research, University of Chicago Press, vol. 13(2), pages 257-71, September.
    6. Marvel, Howard P, 1976. "The Economics of Information and Retail Gasoline Price Behavior: An Empirical Analysis," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 1033-60, October.
    7. Bruce Marion & Grant Devine, 1979. "The influence of consumer price information on retail pricing and consumer behavior," Framed Field Experiments 00138, The Field Experiments Website.
    8. Roger E. Alcaly, 1976. "Information and Food Prices," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 658-671, Autumn.
    9. Salop, Steven, 1977. "The Noisy Monopolist: Imperfect Information, Price Dispersion and Price Discrimination," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 393-406, October.
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