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Not all price endings are created equal: Price points and asymmetric price rigidity

Levy, Daniel and Snir, Avichai and Gotler, Alex and Chen, Haipeng (Allan) (2019): Not all price endings are created equal: Price points and asymmetric price rigidity. Forthcoming in: Journal of Monetary Economics No. forthcoming

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Abstract

We document an asymmetry in the rigidity of 9-ending prices relative to non-9-ending prices. Consumers have difficulty noticing higher prices if they are 9-ending, or noticing price-increases if the new prices are 9-ending, because 9-endings are used as a signal for low prices. Price setters respond strategically to the consumer-heuristic by setting 9-ending prices more often after price-increases than after price-decreases. 9-ending prices, therefore, remain 9-ending more often after price-increases than after price-decreases, leading to asymmetric rigidity: 9-ending prices are more rigid upward than downward. These findings hold for both transaction-prices and regular-prices, and for both inflation and no-inflation periods.

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