End of 9-Endings and Price Perceptions

Chen, Haipeng (Allan) and Levy, Daniel and Snir, Avichai (2017): End of 9-Endings and Price Perceptions.

Abstract

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 parliament has passed a law prohibiting the use of non 0-ending prices. We find that one year after 9-ending prices have disappeared, 90-ending prices acquired the same status as 9-ending prices had before the law was passed. 90-ending prices became the new psychological price points. The retailers and the shoppers both reacted to the regulatory intervention optimally, which has eliminated the regulation’s intended effect.

• Item Type: MPRA Paper
• Language: English
• Keywords: 9-ending prices, psychological price points, sticky prices, rigid prices, price recall, price control, price regulation, integer constraint
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; K - Law and Economics > K2 - Regulation and Business Law > K20 - General; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L16 - Industrial Organization and Macroeconomics: Industrial Structure and Structural Change ; Industrial Price Indices

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