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Consumer Right-to-Split

Authors: Ram Orzach; Miron Stano;

Consumer Right-to-Split

Abstract

<p>When consumers receive an extreme quantity discount where the marginal price of the extra quantity is less than its marginal cost, does this phenomenon signal a great deal or does it create the opposite effect indicating that their consumer surplus has been reduced or possibly even eliminated. Observing a marginal price of the extra quantity less than its marginal cost can be generated by offering an expensive small quantity. In this case, the firm can extract the consumer surplus from those who purchase the large quantity. Also, the firm can extract the consumer surplus from those who purchase the small quantity. This may lead to market failure where the firm gets the entire surplus.</p> <p>This note introduces consumer strategies to overcome this kind of market failure. The underlying idea of our proposal is simple: consumers have the right to divide the quantity of the good with another consumer, or to get the smaller quantity at a proportional price of the large quantity. We call this the right-to-split and examine the theoretical implications of two variations that, when allowed by the firm, will increase consumer welfare. A wider understanding of the implications involving products with extreme quantity discounts may increase public pressure on firms, similar to the right-to-repair movement, to allow right-to-split options.&nbsp;</p>

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
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