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Shrinkflation

Author

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  • Chalioti, Evangelia
  • Serfes, Konstantinos

Abstract

To maintain profitability amid rising costs, firms resort to shrinkflation, reducing product sizes. This paper shows that the presence of inattentive consumers lead to higher per-unit prices, especially in less competitive markets. Shrinkflation reduces consumer utility, necessitating regulatory action.

Suggested Citation

  • Chalioti, Evangelia & Serfes, Konstantinos, 2024. "Shrinkflation," Economics Letters, Elsevier, vol. 244(C).
    • Handle: RePEc:eee:ecolet:v:244:y:2024:i:c:s0165176524004439
    DOI: 10.1016/j.econlet.2024.111959
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    References listed on IDEAS

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    1. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and Taxation: Theory and Evidence," American Economic Review, American Economic Association, vol. 99(4), pages 1145-1177, September.
    2. In Kyung Kim, 2024. "Consumers' preference for downsizing over package price increases," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 33(1), pages 25-52, January.
    3. Xavier Gabaix & David Laibson, 2018. "Shrouded attributes, consumer myopia and information suppression in competitive markets," Chapters, in: Victor J. Tremblay & Elizabeth Schroeder & Carol Horton Tremblay (ed.), Handbook of Behavioral Industrial Organization, chapter 3, pages 40-74, Edward Elgar Publishing.
    4. Jun Yao & Harmen Oppewal & Di Wang, 2020. "Cheaper and smaller or more expensive and larger: how consumers respond to unit price increase tactics that simultaneously change product price and package size," Journal of the Academy of Marketing Science, Springer, vol. 48(6), pages 1075-1094, November.
    5. Heidhues, Paul & Köszegi, Botond, 2018. "Behavioral Industrial Organization," CEPR Discussion Papers 12988, C.E.P.R. Discussion Papers.
    6. Ioannis Evangelidis, 2024. "Frontiers: Shrinkflation Aversion: When and Why Product Size Decreases Are Seen as More Unfair than Equivalent Price Increases," Marketing Science, INFORMS, vol. 43(2), pages 280-288, March.
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    More about this item

    Keywords

    Shrinkflation; Inattentive consumers; Product size;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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