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Two plus two equals six: an alternative explanation of why so many goods prices end in nine

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Author Info
David Demery
Nigel W. Duck ()
Abstract

The prevalence of prices ending in 99 cents is explained as the result of rational consumers rounding prices up. Monopolists are shown to be harmed by this practice whereas consumers may gain. The model is compared with two other models: Basu's (1997) model and one which assumes consumers round prices down.

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File URL: http://www.efm.bris.ac.uk/economics/working_papers/pdffiles/dp07598.pdf
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Publisher Info
Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 07/598.

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Length: 11 pages
Date of creation: Jul 2007
Date of revision:
Handle: RePEc:bri:uobdis:07/598

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Related research
Keywords: Consumer rationality price perception pricing

Find related papers by JEL classification:
A10 - General Economics and Teaching - - General Economics - - - General
D40 - Microeconomics - - Market Structure and Pricing - - - General
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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  1. Kaushik Basu, 2006. "Consumer Cognition and Pricing in the Nines in Oligopolistic Markets," Journal of Economics & Management Strategy, Blackwell Publishing, vol. 15(1), pages 125-141, 03. [Downloadable!] (restricted)
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This page was last updated on 2008-8-30.

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