Hassle Costs and Price Discrimination: An Empirical Welfare Analysis

Guillermo Marshall

American Economic Journal: Applied Economics, 2015, vol. 7, issue 3, 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)

JEL-codes: D22 L13 L25 L81 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/app.20130046
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Citations: View citations in EconPapers (6)

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