Zero-ending prices, cognitive convenience, and price rigidity

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

Journal of Economic Behavior & Organization, 2022, vol. 203, issue C, 519-542

Abstract: We assess the role of cognitive convenience in the popularity and rigidity of 0-ending prices in convenience settings. Studies show that 0-ending prices are common at convenience stores because of the transaction convenience that 0-ending prices offer. Using large store-level retail CPI data, we find that 0-ending prices are popular and rigid at convenience stores even when they offer little transaction convenience. We corroborate these findings with two large retail scanner price datasets from Dominick's and Nielsen. In Dominick's data, we find that there are more 0-endings in the prices of the items in the front-end candies category than in any other category, even though these prices do not affect the convenience of the consumers' check-out transaction. In addition, in both Dominick's and Nielsen's datasets, we find that 0-ending prices have a positive effect on demand. Ruling out consumer antagonism and retailers’ use of heuristics in pricing, we conclude that 0-ending prices are popular and rigid, and that they increase demand in convenience settings, not only for their transaction convenience but also for the cognitive convenience they offer.

Keywords: Cognitive convenience; Transaction convenience; Price rigidity; Price stickiness; Sticky prices; Rigid prices; 0-ending prices; Round prices; Convenient prices; 9-ending prices; Just below prices; Psychological prices; Price points (search for similar items in EconPapers)
JEL-codes: D90 E31 E70 L16 M30 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Zero-Ending Prices, Cognitive Convenience, and Price Rigidity (2022)
Working Paper: Zero-Ending Prices, Cognitive Convenience, and Price Rigidity (2022)
Working Paper: Zero-Ending Prices, Cognitive Convenience, and Price Rigidity (2022)
Working Paper: Zero-Ending Prices, Cognitive Convenience, and Price Rigidity* (2022)
Working Paper: Zero-Ending Prices, Cognitive Convenience, and Price Rigidity (2022)
Working Paper: Zero-Ending Prices, Cognitive Convenience, and Price Rigidity (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:203:y:2022:i:c:p:519-542

DOI: 10.1016/j.jebo.2022.09.018

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