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

Avichai Snir (), Daniel Levy (), Alex Gotler () and Haipeng (Allan) Chen ()
Additional contact information
Avichai Snir: Department of Banking and Finance, Netanya Academic College, Israel
Alex Gotler: Department of Education and Psychology, Open University, Israel

Working Paper series from Rimini Centre for Economic Analysis

Abstract: There is evidence that 9-ending prices are more common and more rigid than other prices. We use data from three sources: a laboratory experiment, a field study, and a large US supermarket chain, to study the cognitive underpinning and the ensuing asymmetry in rigidity associated with 9-ending prices. We find that consumers use 9-endings as a signal for low prices, and that this signal interferes with price information processing. Consequently, consumers are less likely to notice a bigger price when it ends with 9, or a price increase when the new price ends with 9, in comparison to a situation where the prices end with some other digit. We also find that retailers respond strategically to this consumer bias by setting 9-ending prices more often after price increases than after price decreases. 9-ending prices, therefore, usually increase only if the new prices are also 9ending. Consequently, there is an asymmetry in the rigidity of 9-ending prices: they are more rigid than non 9-ending prices upward but not downward.

Keywords: Price Points; Price Recall; Sticky Prices; Rigid Prices; Price Adjustment; 9-Ending Prices; Psychological Prices (search for similar items in EconPapers)
JEL-codes: C91 C93 D03 D80 E31 L16 M31 (search for similar items in EconPapers)
Date: 2012-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.rcea.org/RePEc/pdf/wp69_12.pdf (application/pdf)

Related works:
Journal Article: Not all price endings are created equal: Price points and asymmetric price rigidity (2020)
Journal Article: Not all price endings are created equal: Price points and asymmetric price rigidity (2020)
Working Paper: Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity (2019)
Working Paper: Not all price endings are created equal: Price points and asymmetric price rigidity (2019)
Working Paper: Not all price endings are created equal: Price points and asymmetric price rigidity (2019)
Working Paper: Not all price endings are created equal: Price points and asymmetric price rigidity (2019)
Working Paper: Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity (2014)
Working Paper: Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:69_12

Access Statistics for this paper

More papers in Working Paper series from Rimini Centre for Economic Analysis Contact information at EDIRC.
Bibliographic data for series maintained by Marco Savioli ().