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99 Cent: Price points in e-commerce

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  • Hackl, Franz
  • Kummer, Michael E.
  • Winter-Ebmer, Rudolf

Abstract

Setting prices ending in nines is a common feature of many markets for consumer products. This prevalence has been explained either by a specific image of such price points or by the exploitation of rational inattention on the part of the consumers who want to economize on the cost of information processing. We use data from an Austrian price comparison site and find a remarkable prevalence of such price setting. Prices ending with nine are also sticky: price-setters change them with a significantly lower probability; rivals underbid these prices more seldom if they represent the cheapest price on the market, and we observe higher price jumps by price leaders for these price points. Finally, we explore the impact of these price points on the consumers’ demand.

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Bibliographic Info

Article provided by Elsevier in its journal Information Economics and Policy.

Volume (Year): 26 (2014)
Issue (Month): C ()
Pages: 12-27

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Handle: RePEc:eee:iepoli:v:26:y:2014:i:c:p:12-27

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Web page: http://www.elsevier.com/locate/inca/505549

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Keywords: E-commerce; Pricing behavior; Focal prices; Price stability;

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Cited by:
  1. Antonio Filippin, 2013. "The Effect of .99 Price Endings on Consumer Demand: An Example of Confounding Factors Surviving in Field Experiments," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 9(2), pages 211-229, July.

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