Pricing and Packaging: The Case of Marijuana

Kenneth W. Clements
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Kenneth W. Clements: University of Western Australia

Journal of Business, 2006, vol. 79, issue 4, pages 2019-2044

Abstract: In many markets, unit prices decline as the quantity purchased rises, a phenomenon that can be considered part of the economics of packaging. This article reviews the economic foundations of quantity discounts and proposes new ways of measuring and analyzing them. These ideas are implemented with the prices of marijuana, a product that is shown to be priced in a manner not too different from that used for groceries as well as some other illicit drugs. In broad terms, the results support the following pricing rule: the unit price falls by 2.5% when the package size increases by 10%.

Date: 2006

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