Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104552
Authors: 
Levy, Daniel
Snir, Avichai
Year of Publication: 
22-Jan-2013
Series/Report no.: 
Emory University Working Paper 13-03
Abstract: 
If producers have more information than consumers about goods’ attributes, then they may use non-price (rather than price) adjustment mechanisms and, consequently, the market may reach a new equilibrium even if prices don't change. We study a situation where producers adjust the quantity per package rather than the price in response to changes in market conditions. Although consumers should be indifferent between equivalent changes in goods' prices and quantities, empirical evidence suggests that consumers often respond differently to price changes and equivalent quantity changes. We offer a possible explanation for this puzzle by constructing and empirically testing a model in which consumers incur cognitive costs when processing goods’ price and quantity information.
Subjects: 
Quantity Adjustment
Cognitive Costs of Attention
Information Processing
JEL: 
L11
L15
L16
M21
M31
M37
M38
K20
E31
D21
D22
D40
D83
Document Type: 
Working Paper

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