Quantity Surcharges on Groceries

A quantity surcharge exists when the unit cost of a given brand is higher for a large-size package than for a smaller one. This paper examines some product and household characteristics that influence observed quantity surcharging practices. Results indicate that the propensity to buy a large-size package of a product is positively influenced by the extent of a household's usage of that product, procurement cost, and carrying capacity, and is negatively influenced by the propensity to price search. A retailer's decision to levy a quantity surcharge is, in turn, influenced by the demand for the product, the propensity to buy large-size packages, and to some extent the product's carrying cost.