Do Multinational Enterprises from Developed and Emerging Economies Differ in Their Price Discrimination Strategies? Evidence from Africa

Research Summary Do multinational enterprises from developed (DMNEs) and emerging (EMNEs) economies differ in their price discrimination strategies in Sub-Saharan Africa? Using an abductive approach, we analyze novel data from laundry detergent markets in Cameroon, Ghana, and Ivory Coast, where frugal products are widely consumed. We find that, compared to EMNEs, DMNEs charge smaller price premia for frugal relative to non-frugal products by 21%-28%. We examine several plausible explanations and find suggestive evidence that the greater visibility of DMNEs motivates them to exercise caution in setting greater price premia for their frugal relative to non-frugal products. Even within DMNEs, more visible firms charge smaller price premia than less visible firms.Managerial Summary Our investigation reveals an intriguing difference in the pricing strategies of multinational enterprises selling basic consumer goods in Africa. We analyze laundry detergent products sold in Cameroon, Ghana, and Ivory Coast. We find that, compared to multinational enterprises from developed economies (DMNEs), those from emerging economies (EMNEs) charge materially higher price premium on small packs relative to large packs. A key driver appears to be differences in exposure to reputational risk. DMNEs are more cautious about pricing small packs in ways that could be perceived as exploiting resource-constrained consumers. Even within DMNEs, more visible firms charge smaller price premium than less visible ones. These findings highlight that pricing decisions for frugal products entail social considerations, as firms differ in their exposure to stakeholder scrutiny.