Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity

Avichai Snir, Daniel Levy (), Alex Gotler and Haipeng (Allan) Chen ()

MPRA Paper from University Library of Munich, Germany

Abstract: There is evidence that 9-ending prices are more common and more rigid than other prices. We use data from three sources: a laboratory experiment, a field study, and a large US supermarket chain, to study the cognitive underpinning and the ensuing asymmetry in rigidity associated with 9-ending prices. We find that consumers use 9-endings as a signal for low prices, and that this signal interferes with price information processing. Consequently, consumers are less likely to notice a bigger price when it ends with 9, or a price increase when the new price ends with 9, in comparison to a situation where the prices end with some other digit. We also find that retailers respond strategically to this consumer bias by setting 9-ending prices more often after price increases than after price decreases. 9-ending prices, therefore, usually increase only if the new prices are also 9-ending. Consequently, there is an asymmetry in the rigidity of 9-ending prices: they are more rigid than non 9-ending prices upward but not downward.

Keywords: Price Points; Price Recall; Sticky Prices; Rigid Prices; Price Adjustment; 9-Ending Prices; Psychological Prices (search for similar items in EconPapers)
JEL-codes: C91 C93 D03 D80 E31 L16 M31 (search for similar items in EconPapers)
Date: 2012-10-26
New Economics Papers: this item is included in nep-com, nep-exp, nep-hme, nep-ind and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://mpra.ub.uni-muenchen.de/42252/1/MPRA_paper_42252.pdf original version (application/pdf)

Related works:
Journal Article: Not all price endings are created equal: Price points and asymmetric price rigidity (2020)
Journal Article: Not all price endings are created equal: Price points and asymmetric price rigidity (2020)
Working Paper: Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity (2019)
Working Paper: Not all price endings are created equal: Price points and asymmetric price rigidity (2019)
Working Paper: Not all price endings are created equal: Price points and asymmetric price rigidity (2019)
Working Paper: Not all price endings are created equal: Price points and asymmetric price rigidity (2019)
Working Paper: Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity (2014)
Working Paper: Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity (2012)
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