Shrinking Goods

Daniel Levy () and Avichai Snir

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: 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.

Keywords: Quantity Adjustment; Cognitive Costs of Attention; Information Processing (search for similar items in EconPapers)
JEL-codes: D21 D22 D40 D83 E31 K20 L11 L15 L16 M21 M31 M37 M38 (search for similar items in EconPapers)
Date: 2013-01-22
New Economics Papers: this item is included in nep-com, nep-mac and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Shrinking Goods (2013)
Working Paper: Shrinking Goods (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:104552

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