Hassle Costs and Price Discrimination: An Empirical Welfare Analysis
- (pp. 123-46)
Abstract
This paper studies a market where soda is sold in both refillable and nonrefillable bottles. Purchasing refillables is inconvenient but cheaper. Using a discrete choice model, I find that price-sensitive customers put less weight on the inconveniences of purchasing refillables. This implies that a retailer can target lower prices to price-sensitive customers using the refillable segment. I evaluate the overall welfare consequences of this market segmentation and find that both customer welfare and profits would decrease (by 12.61 and 4.21 percent, respectively) if the refillables were removed, as there would be an important market-shrinkage effect. (JEL D22, L13, L25, L81)Citation
Marshall, Guillermo. 2015. "Hassle Costs and Price Discrimination: An Empirical Welfare Analysis." American Economic Journal: Applied Economics, 7 (3): 123-46. DOI: 10.1257/app.20130046Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- L13 Oligopoly and Other Imperfect Markets
- L25 Firm Performance: Size, Diversification, and Scope
- L81 Retail and Wholesale Trade; e-Commerce
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