Global Journal of Human Social Science, E: Economics, Volume 22 Issue 2

concept – which he calls, as Prahalad (2005) does, the poverty premium – from the as follows: “The premium is not a single phenomenon, but the interaction of a variety of factors, both in the ways in which services are supplied and the position of low income households as consumers”. (Hirsch, 2019, p. 34). From this perspective, which we can understand as merely from the market, Hirsch (2019) classifies the poverty fine into four types and causes. As for the type, the poverty penalty can be understood from what Hirsch (2019) says, in the following ways: a. Higher prices paid by the poor; b. Higher payouts due to lower quantities purchased; c. Higher prices paid for the way the transaction is carried out; d. Paying higher interest rates, or indebtedness. As for the causes of poverty penalty, Hirsh (2019), interpreting Europe Economics and the New Policy Institute (2010), classifies them into two main groups, each with four causes and another group that results from the combination of the initials, to which that author associates three more causes. This is how the causes of the poverty penalty are classified, according to Hirsch (2019): 1) Supply side factors: a. Competitiveness of pricing. b. Complexity of products and transparency of product information. c. Targeting of products. d. Cost reflexivity or cross subsidy of product types. 2) Demand side factors (low income households): a. Limited capacity for informed switching. b. Requirement for 'no frills' product. c. Limited access to 'enabling' products. d. Risk aversion and behavioral traits. 3) Interaction of supply and demand: a. General market failures. b. Specific market failures. c. Additional premiums. Other authors classify the penalization of poverty in relation to the market, according to the ways in which it manifests itself and/or according to its determinants. Dalsace et al (2012), for example, classify the determinants of poverty penalty as follows: “The paper sheds light on the various underlying mechanisms that contribute to the creation of the poverty penalty. These ‘undesirable side-effects’ of the market are of five types: • An unfavorable cost structure • An unfavorable price structure • The law of supply and demand • A lack of equipment or an unfavorable risk profile • Insufficient objectivity to deal with scarce, imperfect or missing information”. (Dalsace et al, 2012, p. 22) From the same market perspective, Davies, Finney & Hartfree (2016, p. 5), classify the determinants of poverty penalty as follows: “Demand-side factors which reflect low-income households' preferences, needs and circumstances such as having constrained finances, the need for close budgeting control, low usage and risk aversion to actions that might upset tight budgeting control. Supply-side factors which reflect how markets shape the choices available to consumers and impose additional costs on them. They include higher prices that reflect the additional cost of supplying low-income consumers, specific market failures where products do not meet the needs of low-income groups and general market practices where uncompetitive or unfair practices hit low-income consumers hardest. Compounding factors that do not sit clearly on either the demand or the supply side, but mediate or compound the relationship between them, such as financial and digital exclusion and geography”. Based on this classification of determinants, these same authors also classify the forms of poverty penalty into eight groups, in which they list 29 types. Among the forms and causes presented in the various classifications, some have gained prominence in the literature. This is the case of the so-called store and size effects. Related to the first one, a so-called distance effect is involved. Kunreuther (1972), based on Alcaly and Klevorick (1971), defines store and size effects. The first inversely relates the size of the store to the price of the same merchandise. The second inversely relates the package size of the same commodity to its price. In the author's words: “The store effect refers to price differentials between stores for the same-sized item. If the price per ounce for any given package size varies inversely with the size of store, then individuals who shop in chains would pay less for identical items than those who patronize smaller grocers. The size effect refers to differences in price per ounce for various sizes of a particular branded item within any given store”. (Kunreuther, 1972, p. 661) This author attributes the store effect to the distance between the buyer and the supplier and the size effect to consumption habits and storage costs. In your words: “The store effect provides a measure of the importance of a consumer's location and his mobility on purchasing decisions. (...) The size effect measures the role which budget, storage constraints and costs of holding inventory play in purchasing decisions. (...) Low consumption rates will discourage large size purchases due to the cost of holding inventory”. (Kunreuther, 1972, p. 661) © 2022 Global Journals Volume XXII Issue II Version I 25 ( ) Global Journal of Human Social Science - Year 2022 E Poverty Penalty: A Market-Based Review