Saturday, July 19, 2008

"Mustard 10 for $10"

That was the sale at Wal-Mart today on French Spicy Brown Mustard, which actually means they were $1/piece. We bought 2, but it is interesting how the decision on this must have played out in scripting the sale. My guess is that if they say X for $Y, some people assume you have to buy X in order to get the deal instead of just buying the number you want at $X/Y. However, that means they also lose a few customers who don't want to buy X units as well. So they need to jointly determine the price ($X/Y) and X for profit maximization.

Is this veiled 2nd degree price discrimination, where they give the impression of higher per unit costs with small purchases without it actually being the case?

In addition, they also need to determine which products to advertise this way, as it would lose its effect if they did it on all goods (though it is probably just the goods they currently have too much inventory of).

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