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Convenient prices and price rigidity: cross-sectional evidence

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  • Edward S. Knotek

Abstract

This paper provides cross-sectional evidence of convenient prices--prices that simplify and expedite transactions and thereby reduce the time costs from physically making a transaction. I propose that firms may wish to set convenient prices for items that: (1) are typically purchased with cash; (2) are sold alone or with a few similar items; and (3) are high-traffic transactions, i.e., require queuing or are purchased very frequently. I find broad support for the use of convenient prices in locations where making a rapid transaction is important. Convenience also appears to predominantly affect goods and services with above-average price rigidity.

Suggested Citation

  • Edward S. Knotek, 2008. "Convenient prices and price rigidity: cross-sectional evidence," Research Working Paper RWP 08-04, Federal Reserve Bank of Kansas City.
    • Handle: RePEc:fip:fedkrw:rwp08-04
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