Downsizing Price Increases: A Greater Sensitivity to Price than Quantity in Consumer Markets

Abstract

As the cost of goods increase, manufacturers routinely pass these costs on to consumers through higher prices. A less obvious strategy is to maintain price, but to reduce the size of the product. In many ways, this downsizing should mirror a straight price increase when it comes to consumer behavior. Marketplace and experimental data show this is not the case and that consumers are more sensitive to changes in price than to changes in quantity.

Keywords: Marketing

JEL Classification: M3