Preisschwellen und Deckungsbeitrag - Verschenkt der Handel große Potentiale?

Karen Gedenk and Henrik Sattler

Working Paper Series A from Friedrich Schiller University of Jena, School of of Economics and Business Administration

Abstract: Retailers have been criticized for heavily relying on odd prices although their advantage over even prices has not been convincingly proven. In this paper we argue that such behavior does not have to stem solely from tradition, but may be seen as a rational way of dealing with uncertainty. We review 21 empirical studies on the effects of odd versus even prices and find that the results are inconclusive as to whether threshold effects exist. In an analysis of profit contributions we then show that in the light of such uncertainty it is rational to set odd prices. The reason is that only small losses in profit contribution are incurred when odd prices are set although no thresholds exist. In the opposite case, however, losses can be quite substantial. Results of a simulation show the size of the two errors for a realistic range of response parameters.

Date: 1997-07-15
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Persistent link: https://EconPapers.repec.org/RePEc:jen:jenabe:1997-04

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