Larger quantities of a good often have a lower average price per unit good than smaller quantities of the same good, which holds for cereal boxes, CDRs, soda, etc. I am aware of two reasons for this:
a) Differences in cost - Transportation, packaging, etc may make it cheaper to produce and sell a given amount of the large good compared to the same amount in smaller packages. b) I think I have also seen the argument that it might reflect an attempt to reduce the consumer surplus by offering two bundles in the market that appeal to different types of customers with self-selection constraints imposed. This is similar to the explanation sometimes offered for business class/tourist class plane seats and so on. Can anyone help me with references that make the above arguments, or (just as importantly) references that suggest other explanations? Sincerely, Ole Rogeberg
