99 cent: Price Points in E-Commerce

Franz Hackl (franz.hackl@jku.at), Michael Kummer and Rudolf Winter-Ebmer

No 2010-02, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

Abstract: Basu (2006) argues that the prevalence of 99 cent prices in shops can be explained with rational consumers who disregard the rightmost digits of the price. This bounded rational behaviour leads to a Bertrand equi- librium with positive markups. We use data from an Austrian price com- parison site and find results highly compatible with Basu's theory. We can show that price points - in particular prices ending in 9 - are preva- lent and have significant impact on consumer demand. Moreover, these price points are sticky; neither the price-setter itself wants to change them neither the rivals do underbid these prices, if they represent the cheapest price on the market.

Keywords: e-commerce; price comparison; price policy (search for similar items in EconPapers)
JEL-codes: L25 L81 M31 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2010-02
New Economics Papers: this item is included in nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Related works:
Journal Article: 99 Cent: Price points in e-commerce (2014)
Working Paper: 99 cent: Price points in e-commerce (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:jku:econwp:2010_02

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