If You Think 9-Ending Prices Are Low, Think Again

Snir, Avichai and Levy, Daniel (2019): If You Think 9-Ending Prices Are Low, Think Again. Forthcoming in: Journal of the Association for Consumer Research , Vol. 6, No. 1

Abstract

9-ending prices, which comprise between 40%–95% of retail prices, are popular because shoppers perceive them as being low. We study whether this belief is justified using scanner price-data with over 98-million observations from a large US grocery-chain. We find that 9-ending prices are higher than non 9-ending prices, by as much as 18%. Two factors explain why shoppers believe, mistakenly, that 9-ending prices are low. First, we find that among sale-prices, 9-ending prices are indeed lower than non 9-ending prices, giving 9-ending prices an aura of being low. Second, at first, 9-ending prices were indeed lower than other prices. Shoppers, therefore, learned to associate 9-endings with low prices. Over time, however, 9-ending prices rose substantially, which shoppers failed to notice, because the continuous use of 9-ending prices for promoting deep price cuts draws shoppers’ attention to them, and helps to maintain-and-preserve the image of 9-ending prices as bargain prices.

• Item Type: MPRA Paper
• Language: English
• Keywords: Behavioral Pricing, Psychological Prices, Price Perception, Image Effect, 9-Ending Prices, Price Points, Regular Prices, Sale Prices, Sale Filter
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; D - Microeconomics > D2 - Production and Organizations > D22 - Firm Behavior: Empirical Analysis; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D40 - General; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D87 - Neuroeconomics; D - Microeconomics > D9 - Intertemporal Choice > D90 - General; D - Microeconomics > D9 - Intertemporal Choice > D91 - Intertemporal Household Choice ; Life Cycle Models and Saving; E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level ; Inflation ; Deflation; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E50 - General; K - Law and Economics > K2 - Regulation and Business Law > K22 - Business and Securities Law; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure ; Size Distribution of Firms; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L16 - Industrial Organization and Macroeconomics: Industrial Structure and Structural Change ; Industrial Price Indices; L - Industrial Organization > L8 - Industry Studies: Services > L81 - Retail and Wholesale Trade ; e-Commerce; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics > M21 - Business Economics; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising > M30 - General; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M3 - Marketing and Advertising > M31 - Marketing

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