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Paying more for less: why don't households in Tanzania take advantage of bulk discounts?

Author

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  • Brian Dillon
  • Joachim De Weerdt
  • Ted O'Donoghue

Abstract

Despite average per-capita consumption of roughly $1 per day, many Tanzanian households do not take advantage of bulk discounts for staple goods. Using transaction diaries covering nearly 57,000 purchases by 1,499 households over two weeks, we find that through bulk purchasing the average household could spend 8.9% less on observed quantities (or consume 15.6% more at observed expenditure). We investigate several explanations for the observed purchasing patterns, and find evidence consistent with inattention, worries about over-consumption, avoidance of social taxation, and coordination problems. Contrary to prior work, we find little evidence that liquidity constraints prevent poor households from bulk purchasing.

Suggested Citation

  • Brian Dillon & Joachim De Weerdt & Ted O'Donoghue, 2017. "Paying more for less: why don't households in Tanzania take advantage of bulk discounts?," Working Papers of LICOS - Centre for Institutions and Economic Performance 584133, KU Leuven, Faculty of Economics and Business (FEB), LICOS - Centre for Institutions and Economic Performance.
    • Handle: RePEc:ete:licosp:584133
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    Cited by:

    1. is not listed on IDEAS
    2. Wich, Hannah & Harris-Lagoudakis, Katherine, 2025. "Does SNAP participation increase bulk purchases?," Journal of Public Economics, Elsevier, vol. 249(C).
    3. Christine M. Sauer & Thomas Reardon & Nicole M. Mason, 2023. "The poor do not pay more: Evidence from Tanzanian consumer food expenditures controlling for the food environment," Agricultural Economics, International Association of Agricultural Economists, vol. 54(5), pages 638-661, September.
    4. John Gibson & Bonggeun Kim, 2018. "Economies of scale, bulk discounts, and liquidity constraints: comparing unit value and transaction level evidence in a poor country," Review of Economics of the Household, Springer, vol. 16(1), pages 21-39, March.
    5. Gross, Jeremie & Guirkinger, Catherine & Platteau, Jean-Philippe, 2020. "Buy as you need: Nutrition and food storage imperfections," Journal of Development Economics, Elsevier, vol. 144(C).

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    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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