## 22 January 2015

### Everyday bounded rationality

I took this photo at a California supermarket. It displays the price for a 24-bottle pack of Nestle water.

Let's figure out which price applies to you...

This 24-pack is...
\$3.99 if you buy one with a loyalty card
\$4.99 if you buy one without a loyalty card
\$2.99 if you buy 5 packs (120 bottles) with a card

...but make sure you add sales tax (8 percent in this county) and CRV (bottle deposit), which varies by container size. I'm not sure, but I'd guess that a purchase of a single 24-pack, without card, would cost \$(4.99*1.08)+(24*0.05) = \$6.59, or more than double the screaming \$2.99 price...

So, is this normal? Let's look at the Dutch version of things:

It says € 1.67 for 6 bottles of 500ml water, at a cost of € 0.56/liter. (I can't even tell how many ounces or liters comes with the 24 bottles above.) That's the tax and (no) deposit-inclusive price, btw.

Bottom Line: In some countries, stores sell you goods. In others, they sell you a bill of goods. Perhaps that confusion explains why Americans are so (fatally) abusive of drugs (compared to the Dutch).

#### 1 comment:

1. Oh boy, gotta love shopping in the US of A.

Let's make some educated guesses. The picture says 28/16.9FO. Let's assume that 28=\$0.28*, and that FO means fluid ounces. 16.9 fluid ounces is (essentially) .5 liters. (at 33.8 ounces per liter, neglecting decimal dust). So, if theses guess are correct, this mega-store is asking \$0.56/liter water (and plastic, packaging and all of the other bonus nonsense included around the water.)

Pushing this a bit farther, a price point of \$4.99, at \$0.56/liter, yields 9 liters per flat of 24 bottles. Each bottle would hold .375 liters of water or 12.69 fluid ounces. This is a common size for may of Nestle's products- perrier, poland spring, arrowhead, ice mountain, and san pelligrino (less sure on the last one).

So, if \$4.99 for 9 liters is \$0.56/liter,
then \$3.99/9 liters is \$0.44/liter and
\$2.99 for 9 liters is \$0.33/liter (minimum of 45 liters).

At .88EUR/USD, those numbers are:
(w/o card): 64 EUR/liter
(w/card): .5 EUR/liter
(w/card, bulk buy and small truck): .375 EUR/liter

*Before all of you math geeks go wacko, I believe this number is actually \$0.277/16.9 fluid ounces. The arithmetic works our well enough and matches actual bottle sizes in the US of A.

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