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Do psychological prices contribute to price rigidity? Evidence from German scanner data on food brands

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  • Roland Herrmann

    (Institute of Agricultural Policy and Market Research, University of Giessen, Senckenbergstr. 3, D-35390 Giessen, Germany)

  • Anke Moeser

    (Institute of Nutrition Science, University of Giessen, Senckenbergstr. 3, D-35390 Giessen, Germany)

Abstract

A substantial degree of price rigidity has been reported for branded foods in various studies with scanner data. One possible explanation for price rigidity is the existence of psychological pricing points. The authors analyze to what extent psychological pricing plays a role in grocery retailing and whether it contributes to the price rigidity of branded foods in Germany. Psychological pricing-defined here as just-below-the-round-figure-pricing-is empirically analyzed with scanner data of weekly prices for 20 food brands in 38 retail outlets from September 1996 to June 1999. Psychological pricing turned out to be extremely important in German food retailing. Branded food prices are remarkably sticky and psychological pricing points contribute strongly to price rigidity. Other factors like the sales phenomenon and firm-specific effects are additionally important. [EconLit Classifications: Q110, Q130]. © 2006 Wiley Periodicals, Inc. Agribusiness 22: 51-67, 2006.

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File URL: http://hdl.handle.net/10.1002/agr.20075
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 22 (2006)
Issue (Month): 1 ()
Pages: 51-67

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Handle: RePEc:wly:agribz:v:22:y:2006:i:1:p:51-67

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Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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  1. Anil K. Kashyap, 1990. "Sticky prices: new evidence from retail catalogs," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 112, Board of Governors of the Federal Reserve System (U.S.).
  2. Dennis W. Carlton, 1986. "The Rigidity of Prices," NBER Working Papers 1813, National Bureau of Economic Research, Inc.
  3. Herrmann, Roland & Moser, Anke, 2003. "Price Variability Or Rigidity In The Food-Retailing Sector? Theoretical Analysis And Evidence From German Scanner Data," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa, International Association of Agricultural Economists 25867, International Association of Agricultural Economists.
  4. Elizabeth Powers & Nicholas Powers, 2001. "The Size and Frequency of Price Changes: Evidence from Grocery Stores," Review of Industrial Organization, Springer, Springer, vol. 18(4), pages 397-416, June.
  5. Schindler, Robert M & Kirby, Patrick N, 1997. " Patterns of Rightmost Digits Used in Advertised Prices: Implications for Nine-Ending Effects," Journal of Consumer Research, University of Chicago Press, University of Chicago Press, vol. 24(2), pages 192-201, September.
  6. Daniel Hosken & David Reiffen, 2001. "Multiproduct retailers and the sale phenomenon," Agribusiness, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 17(1), pages 115-137.
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Cited by:
  1. Weber, Sascha A. & Anders, Sven, 2005. "Price Rigidity and Market Power in German Retailing," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark, European Association of Agricultural Economists 24721, European Association of Agricultural Economists.
  2. Herrmann, Roland & Möser, Anke & Weber, Sascha A., 2009. "Grocery retailing in Germany: Situation, development and pricing strategies," Discussion Papers 41, Justus Liebig University Giessen, Center for international Development and Environmental Research (ZEU).
  3. Craigwell, Roland & Moore, Winston & Worrell, DeLisle, 2011. "Does Consumer Price Rigidity Exist in Barbados?," MPRA Paper 40928, University Library of Munich, Germany.

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