Sales, Quantity Surcharge, and Consumer Inattention

31 Pages Posted: 5 Nov 2010 Last revised: 15 Jan 2015

See all articles by Sofronis Clerides

Sofronis Clerides

University of Cyprus - Department of Economics; Centre for Economic Policy Research (CEPR); University of Bologna - Rimini Center for Economic Analysis (RCEA)

Pascal Courty

University of Victoria; European University Institute - Economics Department (ECO); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2014

Abstract

Quantity surcharges occur when retailers carry 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, sales of the large size decline only slightly even though the same quantity can be purchased for less. We document this behavior in two datasets and four different product categories. It is consistent with the notion of passive shoppers found in the industrial organization literature and the notion of rational inattention in macroeconomics. We discuss implications for consumer decision making, demand estimation, and firm pricing.

Keywords: quantity surcharge, sales, promotions, consumer inattention, quantity discounts, nonlinear pricing

JEL Classification: L12, L13, D4

Suggested Citation

Clerides, Sofronis and Courty, Pascal, Sales, Quantity Surcharge, and Consumer Inattention (December 2014). Available at SSRN: https://ssrn.com/abstract=1702861 or http://dx.doi.org/10.2139/ssrn.1702861

Sofronis Clerides

University of Cyprus - Department of Economics ( email )

75 Kallipoleos Street
P.O. Box 20537
1678 Nicosia
Cyprus
+35 7 2289 2450 (Phone)
+35 7 2289 2432 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of Bologna - Rimini Center for Economic Analysis (RCEA) ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

Pascal Courty (Contact Author)

University of Victoria ( email )

3800 Finnerty Rd
Victoria, British Columbia V8P 5C2
Canada

European University Institute - Economics Department (ECO) ( email )

Villa San Paolo
Via della Piazzuola 43
50133 Florence
Italy
+39 055 4685 925 (Phone)
+39 055 4685 902 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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