Open Daily: 10am - 10pm | Alley door pickup 10am - 7pm 3038 Hennepin Ave Minneapolis, MN
612-822-4611

  • Open Daily: 10am - 10pm
    Alley-side Pickup: 10am - 7pm

    3038 Hennepin Ave Minneapolis, MN
    612-822-4611

Open Daily: 10am - 10pm | Alley-side Pickup: 10am - 7pm
3038 Hennepin Ave Minneapolis, MN
612-822-4611
Quantity Discounts From Risk Averse Sellers

Quantity Discounts From Risk Averse Sellers

Federal Trade Commission

Paperback

Business General

ISBN10: 1502523213
ISBN13: 9781502523211
Publisher: Createspace
Published: Sep 30 2014
Pages: 30
Weight: 0.21
Height: 0.06 Width: 8.50 Depth: 11.00
Language: English
It is widely believed that larger customers in a market can secure lower prices than smaller customers. This book presents conditions under which risk averse sellers, who can distinguish larger customers from smaller customers, but who cannot observe customers' valuations, have an incentive to offer lower prices to larger customers. The intuition is that a single customer that demands a specific quantity represents a riskier profit source than multiple customers with independent valuations whose demands sum to that same quantity. Sellers respond to the riskier profit source by offering a lower price to reduce some of the risk. The book suggests the existence of a pure customer size effect that would always create an incentive for sellers to offer larger customers lower prices. It also suggests two other effects, one due to a change in the size of the market and the other based on the mix of large and small customers. These effects may either reinforce or counteract the pure customer size effect, depending on the nature of the seller's utility function.

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