An Empirical Model of Quantity Discounts with Large Choice Sets

Alessandro Iaria and Ao Wang

No 16666, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We introduce a Generalized Nested Logit model of demand for bundles that can be estimated sequentially and virtually eliminates any challenge of dimensionality related to large choice sets. We use it to investigate quantity discounts for carbonated soft drinks by simulating a counterfactual with linear pricing. The prices of quantities up to 1L decrease by -31.5% while those of larger quantities increase by +14.8%. Purchased quantities decrease by -20.4%, associated added sugar by -23.8%, and industry profit by -20.5%. Consumer surplus however reduces only moderately, suggesting that linear pricing may be effective in limiting added sugar intake.

Keywords: Quantity discounts; Large choice sets; Demand for bundles; Generalized nested logit; Carbonated soft drinks; Purchase of multiple units (search for similar items in EconPapers)
JEL-codes: C55 C63 L13 L4 L66 (search for similar items in EconPapers)
Date: 2021-10
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP16666 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:16666

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP16666

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().