Zero-ending prices, cognitive convenience, and price rigidity

Avichai Snir, Haipeng (Allan) Chen, Daniel Levy

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

We assess the role of cognitive convenience in the popularity and rigidity of 0-ending prices in convenience settings. Studies show that 0-ending prices are common at convenience stores because of the transaction convenience that 0-ending prices offer. Using large store-level retail CPI data, we find that 0-ending prices are popular and rigid at convenience stores even when they offer little transaction convenience. We corroborate these findings with two large retail scanner price datasets from Dominick's and Nielsen. In Dominick's data, we find that there are more 0-endings in the prices of the items in the front-end candies category than in any other category, even though these prices do not affect the convenience of the consumers' check-out transaction. In addition, in both Dominick's and Nielsen's datasets, we find that 0-ending prices have a positive effect on demand. Ruling out consumer antagonism and retailers’ use of heuristics in pricing, we conclude that 0-ending prices are popular and rigid, and that they increase demand in convenience settings, not only for their transaction convenience but also for the cognitive convenience they offer.

Original languageEnglish
Pages (from-to)519-542
Number of pages24
JournalJournal of Economic Behavior and Organization
Volume203
DOIs
StatePublished - Nov 2022

Bibliographical note

Publisher Copyright:
© 2022

Keywords

  • 0-ending prices
  • 9-ending prices
  • Cognitive convenience
  • Convenient prices
  • Just below prices
  • Price points
  • Price rigidity
  • Price stickiness
  • Psychological prices
  • Rigid prices
  • Round prices
  • Sticky prices
  • Transaction convenience

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