sealPurdue News

October 1999

Super size is not a super deal, economists' study finds

WEST LAFAYETTE, Ind. -- Consumers who buy "economy-size" packages thinking that they are saving money may be in for a rude awakening.

A Purdue University study has found that consumers are so convinced that larger sizes mean cheaper prices that they don't bother to compare the per-ounce prices. Certain products at the grocery store prey on this inattention by charging more per ounce -- sometimes as much as twice as much per ounce -- for the larger sizes.

Economists call this practice "surcharging." James Binkley, professor of agricultural economics at Purdue, says that surcharging happens frequently in grocery stores.

"We don't really know how many products have a surcharge," Binkley says. "It happens with flour, and I've seen it with toilet paper, canned chili, peanut butter and tomato products such as ketchup."

Binkley, together with John Bejnarowicz, a former graduate student at Purdue, investigated whether consumers were simply willing to pay more for larger sizes for extra convenience or whether they were unaware of the actual price per ounce or unit.

For their research, the economists studied surcharging in tuna. Tuna was selected because surveys have consistently found that it has surcharges on larger sizes.

For example, two six-ounce cans of tuna are usually cheaper than one 12-ounce can.

"This isn't just a slight difference either," Binkley says. "Often the larger sizes are 20 percent more per ounce. There are even reports of times when the surcharge is a full 50 percent to 100 percent.

"One time in a grocery store in Urbana, Illinois, I actually saw a case where the surcharge on tuna was more than 100 percent. You could have bought four six-ounce cans and it would have been cheaper than buying one 12-ounce can."

Another reason the economists chose tuna for the study is that it must be used completely after opening, unlike some products, such as detergent. "This makes large sizes inconvenient, therefore people are unlikely to prefer them," Binkley says.

The study used sales information from 54 wholesale grocery regions in the United States. It compared sales volume and prices of cans of tuna, along with consumer demographics, to determine why consumers buy larger sizes even when they are more expensive.

The results indicated that many consumers who buy the large sizes have a mistaken belief that these sizes are always cheaper per ounce and don't bother to examine the prices. "Tuna surcharges have increased over time," Bejnarowicz says.

The study found that people with higher incomes were more likely to fall victim to the surcharging gambit. "These people have high time demands, and they are less likely to take the time to closely examine the prices. They just grab something and go," Binkley says. "And who can blame them? Who wants to spend all of their time comparing prices on every item? You would be in the store for two hours."

Binkley says it's hard to find out how surcharges arise. "The grocery store retailers claim that it's the manufacturers' pricing, and I think they're probably right," he says "But it's hard to get a straight answer on this. I've called tuna companies several times and asked about surcharging, but they almost never call me back."

Sources: James Binkley, (765) 494-4261;

John Bejnarowicz, (847) 267-4880;

Writer: Steve Tally, (765) 494-9809;

Purdue News Service: (765) 494-2096;

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