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Price Points and Price Rigidity

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Author Info
Daniel Levy ()
Dongwon Lee
Haipeng Chen
Robert Kauffman
Mark Bergen

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Abstract

We study the link between price points and price rigidity, using two datasets containing over 100 million observations. We find that (i) 9 is the most frequently used price-ending for the penny, dime, dollar and ten-dollar digits, (ii) 9-ending prices are between 24%-73% less likely to change in comparison to non-9-ending prices, (iii) the average size of the price change is higher if it ends with 9 in comparison to non-9-ending prices, and (iv) the most common price changes are multiples of dimes, dollars, and ten-dollars. We conclude that price points might constitute a substantial source of retail price rigidity.

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Paper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number 0809.

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Date of creation: Oct 2008
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Handle: RePEc:emo:wp2003:0809

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Julio J. Rotemberg, 2008. "Behavioral Aspects of Price Setting, and Their Policy Implications," NBER Working Papers 13754, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Raymond E. Lombra, 2007. "Pennies, Pricing, and Rounding: Is all the Relevant Analysis In?," Eastern Economic Journal, Eastern Economic Association, vol. 33(1), pages 147-152, Winter. [Downloadable!]
  3. Ernst Glatzer & Fabio Rumler, 2007. "Price Setting in Austria before and after the Euro Cash Changeover: Has Anything Changed in the Last Five Years?," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 85-99, April 200. [Downloadable!]
  4. Michael Ehrmann, 2006. "Rational inattention, inflation developments and perceptions after the euro cash changeover," Working Paper Series 588, European Central Bank. [Downloadable!]
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