Cause Identification — Shrinkflation Decision:\nStatement: Pilay Drinks Company reduced the volume in its tetra-pack instead of increasing the price.\nWhich of the following is the most plausible cause for this managerial decision?

Introduction / Context:
The firm adopts “shrinkflation”: hold nominal price, reduce quantity. We must identify the marketing/behavioural cause that best explains this tactic.

Given Data / Assumptions:

• Effect: Reduced pack volume at same price.
• Candidate causes span income trends, consumer psychology, health trends, brand taste, and retail logistics.

Concept / Approach:
Behavioural pricing literature shows consumers are more sensitive to overt price hikes than to subtle quantity reductions, especially in packaged goods. Thus, keeping the price constant while trimming volume can preserve demand.

Step-by-Step Solution:

Verification / Alternative check:
(a) Lower incomes could motivate either price cuts or shrinkflation, but without tying to salience, it’s weaker. (c) Health concerns could justify reformulation, not necessarily volume reduction. (d) Taste advantage is orthogonal. (e) Retail shelf space can push packaging redesigns, but does not inherently require reducing fill volume.

Why Other Options Are Wrong:
They do not directly explain “reduce quantity while keeping price constant.”

Common Pitfalls:
Attributing shrinkflation to generic cost or health trends rather than consumer price-salience.

Final Answer:
Option B: Price changes are more noticeable than quantity changes.