Munich Personal RePEc Archive

End of 9-Endings, Price Recall, and Price Perceptions

Snir, Avichai and Levy, Daniel and Chen, Haipeng (Allan) (2017): End of 9-Endings, Price Recall, and Price Perceptions. Forthcoming in: Economics Letters No. Forthcoming

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Abstract

Prices that end with 9, also known as psychological price points, are common, comprising about 70% of the retail prices. They are also more rigid than other prices. We take advantage of a natural experiment to document an emergence of a new price ending that has the same effects as 9-endings. In January 2014, the Israeli government passed a new regulation prohibiting the use of non 0-ending prices, bringing an end to 9-ending prices. We find that seven months after 9-ending prices have disappeared, 90-ending prices acquired the same status as 9-ending prices had before the new regulation was adopted. Thus, 90-ending prices became the new psychological price points, partially eliminating the regulation’s intended effect.

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