Multi-unit Pricing

A price takes the form of a cost for either one unit (single-unit pricing) or multiple units (multi-unit pricing). I consider a monopolist selling units of a good to a population of homogeneous consumers to explain why one is preferred to the other. A mental cost arises if the division problem a multi-unit price causes is done. If marginal utility remains high multiple units are desired. Multi-unit pricing is preferred since it creates a cost if fewer units are purchased. If utility exhibits strong diminishing returns single-unit pricing is used to avoid the calculation. Copyright (C) 2008 John Wiley & Sons, Ltd.