Sunday, November 2, 2014

Quantity surcharges, not discounts, at supermarkets

When you shop at a supermarket—say for a bag of chips or a can of tuna—you naturally assume that buying a bigger package must be cheaper per unit and thus will save you money. As it turns out, you often would be wrong. The bigger package can cost you more per unit; there might be a "quantity surcharge." One survey found that 25 percent of brands that offered more than one size imposed some form of quantity surcharge. These surcharges are not errors. Consumer Reports has called them a "sneaky consumer product trick." The trick works best on consumers who don't pay much attention to prices, who just assume the bigger package will be the better deal. (How often have you done this?) One study examined which supermarkets practice this "trick" and found just what our discussion so far would have predicted: supermarkets in low-income neighborhoods are the least likely to have quantity surcharges. It is harder to trick someone into paying more when she is careful to squeeze the most out of every dollar spent.
--Sendhil Mullainathan and Eldar Shafir, Scarcity: Why Having Too Little Means So Much, on exploiting inattention