Consumer Uncertainty and Pack Size

24 Pages Posted: 1 May 2014

See all articles by Subhashish Gupta

Subhashish Gupta

Indian Institute of Management (IIMB), Bangalore

Srinivas Prakhya

Indian Institute of Management (IIMB), Bangalore

Krishanu Rakshit

Indian Institute of Management Calcutta

Date Written: April 30, 2014

Abstract

Packaging is among the most visible features of modern day marketing. Goods which once used to be sold without any packaging such as fruits, vegetables, cereals and milk are now very likely to be sold in packs of fixed sizes. This is true for developed and emerging economies. In this paper we investigate the effect of uncertainty in consumption on pricing of pack sizes. We emphasize the role of uncertainty in consumption as the main issue driving the choice of pack sizes and their pricing. A typical consumer facing a purchase decision does not usually know how much she will later consume. The purchase decision precedes consumption. Buying too much could lead to a large stock of unconsumed goods. This would either have to be consumed later with possibly reduced levels of satisfaction. It would certainly occupy scarce shelf space. We will include both these effects under the common term of storage costs. Buying too little could lead to facing the prospect of having to do without or another trip to the store. Consumers, also differ in the type of uncertainty they face. The producer can then design pack sizes and their corresponding prices to discriminate across consumers and maximize profits.

Keywords: Consumer Uncertainty, Package Size, Pricing

Suggested Citation

Gupta, Subhashish and Prakhya, Srinivas and Rakshit, Krishanu, Consumer Uncertainty and Pack Size (April 30, 2014). IIM Bangalore Research Paper No. 460, Available at SSRN: https://ssrn.com/abstract=2431163 or http://dx.doi.org/10.2139/ssrn.2431163

Subhashish Gupta (Contact Author)

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Srinivas Prakhya

Indian Institute of Management (IIMB), Bangalore ( email )

Bannerghatta Road
Bangalore, Karnataka 560076
India

Krishanu Rakshit

Indian Institute of Management Calcutta ( email )

K305 New Academic Block
Joka, Diamond Harbour Road
Kolkata, West Bengal 700104
India

HOME PAGE: http://https://www.iimcal.ac.in/users/krishanu

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