Why Unit Prices of Supermarket Products Vary

A variation in unit price among different sizes of the same product has been observed in many studies of supermarkets. Quantity price premiums have also been observed. This study reviews theoretical explanations for variation in unit prices and tests the explanations using data from a southeastern supermarket chain. The empirical results indicate that packaging characteristics and storage characteristics of a product are significantly related to unit price variation and to the probability of quantity price premiums.