Paying More for Less: Why Don't Households in Tanzania Take Advantage of Bulk Discounts?

72 Pages Posted: 28 Feb 2020 Last revised: 29 Feb 2020

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Brian Dillon

Cornell University - Charles H. Dyson School of Applied Economics and Management

Joachim De Weerdt

University of Antwerp - Institute of Development Policy and Management; KU Leuven - Centre for Institutions and Economic Performance (LICOS)

Ted O'Donoghue

Cornell University - Department of Economics

Date Written: February 27, 2020

Abstract

Do poor households shop in a way that leaves money on the table? A simple way to maximize consumption, conditional on available cash, is to avoid regularly purchasing small amounts of nonperishable goods when bulk discounts are available at modestly larger quantities. Using two-week transaction diaries covering 48,501 purchases by 1,493 households in Tanzania, this paper finds that through bulk purchasing the average household could spend 8.7 percent less without reducing purchasing quantities. Several explanations for this pattern are investigated, and the most likely mechanisms are found to be worries about over-consumption of stocks and avoidance of social taxation. Contrary to prior work, there is little indication that liquidity constraints prevent poorer households in the sample from buying in bulk, possibly because the bulk quantities under examination are not very large.

Suggested Citation

Dillon, Brian M and De Weerdt, Joachim and O'Donoghue, Ted, Paying More for Less: Why Don't Households in Tanzania Take Advantage of Bulk Discounts? (February 27, 2020). World Bank Policy Research Working Paper No. 9167, Available at SSRN: https://ssrn.com/abstract=3545660

Brian M Dillon (Contact Author)

Cornell University - Charles H. Dyson School of Applied Economics and Management ( email )

Ithaca, NY
United States

HOME PAGE: http://www.briandilloneconomics.com

Joachim De Weerdt

University of Antwerp - Institute of Development Policy and Management ( email )

City campus building S
Lange Sint Annastraat 7
Antwerp, 2000
Belgium

KU Leuven - Centre for Institutions and Economic Performance (LICOS) ( email )

Waaistraat 6 - box 3511
Leuven, 3000
Belgium

Ted O'Donoghue

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-6287 (Phone)
607-255-2818 (Fax)

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