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99 cent: Price Points in E-Commerce

Franz Hackl (), Michael Kummer and Rudolf Winter-Ebmer ()

No 2010-02, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

Abstract: Basu (2006) argues that the prevalence of 99 cent prices in shops can be explained with rational consumers who disregard the rightmost digits of the price. This bounded rational behaviour leads to a Bertrand equi- librium with positive markups. We use data from an Austrian price com- parison site and find results highly compatible with Basu's theory. We can show that price points - in particular prices ending in 9 - are preva- lent and have significant impact on consumer demand. Moreover, these price points are sticky; neither the price-setter itself wants to change them neither the rivals do underbid these prices, if they represent the cheapest price on the market.

Keywords: e-commerce; price comparison; price policy (search for similar items in EconPapers)
JEL-codes: M31 L81 L25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ind
Date: 2010-02
References: View references in EconPapers View complete reference list from CitEc
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Related works:
Journal Article: 99 Cent: Price points in e-commerce (2014) Downloads
Working Paper: 99 cent: Price points in e-commerce (2010) Downloads
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