Baby-cut carrots as convenience incentives - quality-based price discrimination on retail fresh-cut produce

Empirical evidence of quality-based price discrimination (second degree) is limited. I find consumers have positive and heterogenous valuations for the baby-cut attribute of carrots, and I model and establish evidence that retailers utilize this quality attribute to price discriminate. From a welfare perspective, I show the development and introduction of high-quality substitutes, pre-cut and pre-processed versions of fresh produce, increase retail profits with minimal impact on consumer surplus under quality-based price discrimination.

Automated summary

This study finds empirical evidence that retailers utilize the quality attribute of baby-cut carrots to engage in quality-based price discrimination. The introduction of high-quality substitutes, such as pre-cut and pre-processed versions of fresh produce, increases retail profits with minimal impact on consumer surplus under this discriminatory pricing strategy.