Sales, Quantity Surcharge, and Consumer Inattention

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.

Consumer perceptions of QR code technology for enhanced fluid milk shelf-life information provision in a retail setting

“…Another possible explanation for this observation could be customer inattention. This is consistent with research that has shown that many consumers cannot recall the price of the items they placed in the shopping cart accurately or are inattentive to price changes ( Dickson and Sawyer, 1990 ; Clerides and Courty, 2017 ). Despite the fact that signs were placed on both the retail refrigerator door and the half-gallon milk informing customers about the discount opportunity, customers may still have overlooked this information.…”

Research on the Mechanism of Framing Effect Leading to Irrational Decision Making

“…Such groups are more likely to identify the essence of information and offset the influence of marketers to a certain extent. For instance, Clerides and Courty found that most consumers will neglect the unit price information for the gift promotion of the products, but consumers with a high persuasion knowledge level will pay more attention to the price information in this situation [9]. However, if the individual's persuasion knowledge level is low, the marketer's induced behavior will still have a great impact on the consumer's cognitive bias.…”

Tax Salience and Attention Variation

“…7 Caplin and Dean [8] demonstrate that all patterns of consumer behavioral biases are consistent with a general model of optimal costly information acquisition. 8 Clerides and Courty [10] and Huang and Bronnenberg [27] provide empirical evidence that rational inattention explains consumer behavior when acquiring information that is costly. 9 Lacetera et al [29] and Foellmi et al [19] provide evidence of limited attention when economic agents address signals in decision-making.…”

“…While the marketing perspective literature investigates the effects of multi-channel retail mix [30], assortment [5], and category positioning [6] on store choice, evidence of how the display of incentives influences consumer retail choice is scant. 10 We identify whether consumers change regular stores they frequently use in response to the change in the tax price display and find a store-switching behavior: the change in the tax price display to the less salient tax price may induce less-educated consumers to feel that products sold are less expensive and visit these stores more frequently. This study bridges the gap in the literature by providing new evidence of a change in store choices of consumers when the salience of tax price displays is heterogeneous across stores.…”