Not All Price Endings are Created Equal: Price Points and Asymmetric Price Rigidity
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 U.S. 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.
Year of publication: |
2012-10
|
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Authors: | Snir, Avichai ; Levy, Daniel ; Gotler, Alex ; Haipeng (Allen) Chen |
Institutions: | Department of Economics, Emory University |
Saved in:
freely available
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