Sales, Quantity Surcharge, and Consumer Inattention

32 Pages Posted: 29 Nov 2010

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: November 2010

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.

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

JEL Classification: D4, L12, L13

Suggested Citation

Clerides, Sofronis and Courty, Pascal, Sales, Quantity Surcharge, and Consumer Inattention (November 2010). CEPR Discussion Paper No. DP8115. Available at SSRN: https://ssrn.com/abstract=1714887

Sofronis Clerides (Contact Author)

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

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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