Paying more for less: why don't households in Tanzania take advantage of bulk discounts?

Brian Dillon (), Joachim De Weerdt and Ted O'Donoghue

No 571688, Working Papers of LICOS - Centre for Institutions and Economic Performance from KU Leuven, Faculty of Economics and Business (FEB), LICOS - Centre for Institutions and Economic Performance

Abstract: Despite average per-capita consumption of roughly $1 per day, many Tanzanian households do not take advantage of bulk discounts when buying staple goods. Using transaction diaries covering nearly 57,000 purchases of 22 items by 1,499 households, we quantify the financial loss incurred (and the quantity of consumption forgone) by not taking advantage of bulk discounts that are available at frequently realized quantities. Using a conservative approach, we estimate that over two weeks the average household could spend 8.9% less on observed quantities (or consume 15.6% more at observed expenditure). We investigate several possible explanations for not buying in bulk, and find evidence consistent with inattention, worries about over-consumption, avoidance of social taxation, and household coordination problems. Contrary to prior work, we find little evidence that liquidity constraints prevent poor households from bulk purchasing.

Keywords: bulk discounts; liquidity constraints; inattenion; social taxes; coordination costs; self-control problems; consumer behavior (search for similar items in EconPapers)
Date: 2016-10-04
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Paying More for Less: Why Don’t Households in Tanzania Take Advantage of Bulk Discounts? (2021)
Working Paper: Paying More for Less: Why Don't Households in Tanzania Take Advantage of Bulk Discounts ? (2020)
Working Paper: Paying more for less: why don't households in Tanzania take advantage of bulk discounts? (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:licosp:571688

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