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Price Points and Price Rigidity

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  • Daniel Levy
  • Dongwon Lee
  • Haipeng (Allan) Chen
  • Robert J. Kauffman
  • Mark Bergen

Abstract

We study the link between price points and price rigidity, using two datasets - weekly scanner data and Internet data. We find that (i) 9 is the most frequently used price-ending for the penny, dime, dollar, and ten-dollar digits, (ii) the most common price changes are those that keep the price endings at these 9 digits, (iii) the 9-ending prices are less likely to change in comparison to non-9-ending prices, and (iv) the average size of the price change is larger for the 9-ending prices in comparison to non-9-ending prices. Overall, we find that these 9-ending prices form a substantial barrier to price changes - at all digits from pennies to dollars, across a wide range of product categories, retail formats, and retailers.

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Paper provided by Department of Economics, Emory University (Atlanta) in its series Emory Economics with number 1008.

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Date of creation: Aug 2010
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Handle: RePEc:emo:wp2003:1008

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