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Sales, Quantity Surcharge, and Consumer Inattention

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  • Clerides, Sofronis
  • Courty, Pascal

Abstract

Quantity 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.

Suggested Citation

  • Clerides, Sofronis & Courty, Pascal, 2010. "Sales, Quantity Surcharge, and Consumer Inattention," CEPR Discussion Papers 8115, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8115
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    References listed on IDEAS

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    Cited by:

    1. Montinari, Natalia & Runnemark, Emma & Wengström, Erik, 2017. "Self-Scanning and Self-Control: A Field Experiment on Real-Time Feedback and Shopping Behavior," Working Papers 2017:15, Lund University, Department of Economics.
    2. Février, Philippe & Wilner, Lionel, 2016. "Do consumers correctly expect price reductions? Testing dynamic behavior," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 25-40.

    More about this item

    Keywords

    consumer inattention; nonlinear pricing; promotions; quantity discounts; quantity surcharge; sales;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • 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

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