Shrinking Goods

Arbeitspapier

If producers have more information than consumers about goods’ attributes, then they may use non-price (rather than price) adjustment mechanisms and, consequently, the market may reach a new equilibrium even if prices don't change. We study a situation where producers adjust the quantity per package rather than the price in response to changes in market conditions. Although consumers should be indifferent between equivalent changes in goods' prices and quantities, empirical evidence suggests that consumers often respond differently to price changes and equivalent quantity changes. We offer a possible explanation for this puzzle by constructing and empirically testing a model in which consumers incur cognitive costs when processing goods’ price and quantity information.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Emory University Working Paper ; No. 13-03

Classification and Topics

• Classification: Wirtschaft ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Information and Product Quality; Standardization and Compatibility ; Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices ; Business Economics ; Marketing ; Advertising ; Marketing and Advertising: Government Policy and Regulation ; Regulation and Business Law: General ; Price Level; Inflation; Deflation ; Firm Behavior: Theory ; Firm Behavior: Empirical Analysis ; Market Structure, Pricing, and Design: General ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
• Subject: Quantity Adjustment ; Cognitive Costs of Attention ; Information Processing

Contributors, Location and Time

• Event: Geistige Schöpfung
• (who): Levy, Daniel ; Snir, Avichai
• Event: Veröffentlichung
• (who): Emory University
• (where): Atlanta, GA
• (when): 2013-01-22

Further information

• Handle: http://hdl.handle.net/10419/104552
• Last update: 10.03.2025, 11:43 AM CET