More Examples of Pricing For Diminishing Marginal Utility

Feb 29, 2016

 

More examples of products with diminishing marginal utility, and the ways smart vendors price to increase consumption in spite of that.

 

Several recent posts look at how vendors price to increase consumption of products that offer diminishing marginal utility. And example is ice cream – a little is great, but too much will make you feel sick. The "utility" ice cream provides (eating pleasure) decreases with each unit consumed.

So how does the vendor increase consumption in spite of that? One approach is to discount larger serving sizes. One example looks at draft beer, another looks at barbecued meat.



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