Downsizing Price Increases: A Greater Sensitivity to Price than Quantity in Consumer Markets
41 Pages Posted: 30 Jun 2004
Date Written: January 2004
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.
JEL Classification: M3
Suggested Citation: Suggested Citation