Snir, Avichai and Levy, Daniel and Gotler, Alex and Chen, Haipeng (Allan) (2012): Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity.
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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 9-ending. 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.
|Item Type:||MPRA Paper|
|Original Title:||Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity|
|Keywords:||Price Points; Price Recall; Sticky Prices; Rigid Prices; Price Adjustment; 9-Ending Prices; Psychological Prices|
|Subjects:||L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L16 - Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices
D - Microeconomics > D0 - General > D03 - Behavioral Economics; Underlying Principles
M - Business Administration and Business Economics; Marketing; Accounting > M3 - Marketing and Advertising > M31 - Marketing
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level; Inflation; Deflation
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D80 - General
C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C93 - Field Experiments
C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior
|Depositing User:||Daniel Levy|
|Date Deposited:||28. Oct 2012 03:51|
|Last Modified:||16. Feb 2013 22:55|
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