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

Daniel Levy ()

No 2019-01, Working Papers from Bar-Ilan University, Department of Economics

Abstract: We document an asymmetry in the rigidity of 9-ending prices relative to non-9-ending prices. Consumers have difficulty noticing higher prices if they are 9-ending, or noticing price-increases if the new prices are 9-ending, because 9-endings are used as a signal for low prices. Price setters respond strategically to the consumer-heuristic by setting 9-ending prices more often after price-increases than after price-decreases. 9-ending prices, therefore, remain 9-ending more often after price-increases than after price-decreases, leading to asymmetric rigidity: 9-ending prices are more rigid upward than downward. These findings hold for both transaction-prices and regular-prices, and for both inflation and no-inflation periods.

Keywords: Asymmetric Price Adjustment; Sticky/Rigid Prices; 9-Ending Prices; Psychological Prices; Price Points; Regular/Sale Prices (search for similar items in EconPapers)
JEL-codes: E31 L16 C91 C93 D80 M31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ind, nep-mac and nep-mkt
Date: 2019-01
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