Quantity surcharge, competition and package size: evidence from India

We investigate the influence of market competition heterogeneity across package sizes on a firm’s pricing strategy. We focus on the transition from quantity discounts (common practice) to quantity surcharges (charging more for larger packages) and hypothesise that firms adopt surcharges when competition is significantly higher in the smaller-package market. Using a survey of 38 grocery stores, we find that the adoption of surcharges rises alongside substantial disparities in competition between sizes, as measured by brand availability. We posit that varying demand elasticities between pack sizes, driven by heterogeneous consumer preferences, may underpin this competition divergence and subsequent pricing strategy shifts. Our findings contribute to the understanding of pricing dynamics under asymmetric competition and offer insights for firms navigating competitive landscapes across product formats.