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

Daniel Levy, Avichai Snir, Alex Gotler, Haipeng (Allan) Chen

Research output: Contribution to journalArticlepeer-review

15 Scopus citations

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.

Original languageEnglish
Pages (from-to)33-49
Number of pages17
JournalJournal of Monetary Economics
Volume110
Early online date8 Jan 2019
DOIs
StatePublished - Apr 2020

Bibliographical note

Publisher Copyright:
© 2019 Elsevier B.V.

Keywords

  • 9-ending prices
  • Asymmetric price adjustment
  • Price points
  • Psychological prices
  • Regular/Sale prices
  • Sticky/rigid prices

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