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Quantity Surcharges on Groceries

Author

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  • Agrawal, Jagdish
  • Grimm, Pamela E.
  • Srinivasan, Narasimhan

Abstract

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.

Suggested Citation

  • Agrawal, Jagdish & Grimm, Pamela E. & Srinivasan, Narasimhan, 1994. "Quantity Surcharges on Groceries," Research Reports 25179, University of Connecticut, Food Marketing Policy Center.
  • Handle: RePEc:ags:uconnr:25179
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    File URL: http://purl.umn.edu/25179
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    References listed on IDEAS

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    1. Steven Salop, 1977. "The Noisy Monopolist: Imperfect Information, Price Dispersion and Price Discrimination," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 393-406.
    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. Carlson, John A & Gieseke, Robert J, 1983. " Price Search in a Product Market," Journal of Consumer Research, Oxford University Press, vol. 9(4), pages 357-365, March.
    4. 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, Oxford University Press, vol. 5(3), pages 176-186, December.
    5. D. Grant Devine & Bruce W. Marion, 1979. "The Influence of Consumer Price Information on Retail Pricing and Consumer Behavior," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(2), pages 228-237.
    6. Roger E. Alcaly, 1976. "Information and Food Prices," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 658-671, Autumn.
    7. 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 1033-1060, October.
    8. Grant Devine & Bruce Marion, 1979. "The influence of consumer price information on retail pricing and consumer behavior," Framed Field Experiments 00138, The Field Experiments Website.
    9. Urbany, Joel E, 1986. " An Experimental Examination of the Economics of Information," Journal of Consumer Research, Oxford University Press, vol. 13(2), pages 257-271, September.
    10. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213-213.
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    Keywords

    Agribusiness; Demand and Price Analysis;

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