$9.99: Can "Just-Below" Pricing Be Reconciled with Rationality?

John Huston and Nipoli Kamdar
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John Huston: Trinity University
Nipoli Kamdar: Trinity University

Eastern Economic Journal, 1996, vol. 22, issue 2, 137-145

Abstract: A common explanation for the prevalence of "just-below" pricing is that consumers irrationally perceive a price such as $9.99 as significantly lower than $10. This paper offers an alternative explanation that preserves rationality: rational consumers may not include price endings in their considerations because the costs of doing so outweigh the benefits. The model is tested employing a data set consisting of catalog prices, characteristics of goods and advertising traits. We find that the pattern of "just-below" pricing is consistent with both profit-maximizing producers and utility-maximizing consumers.

Keywords: Consumer; Pricing; Rationality (search for similar items in EconPapers)
JEL-codes: D12 L11 M31 (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:22:y:1996:i:2:p:137-145

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