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$9.99: Can "Just-Below" Pricing Be Reconciled with Rationality?

Author

Listed:
  • John Huston

    (Trinity University)

  • Nipoli Kamdar

    (Trinity University)

Abstract

A common explanation for the prevalence of "just-below" pricing is that consumers irrationally perceive a price such as $9.99 as significantly lower than $10. This paper offers an alternative explanation that preserves rationality: rational consumers may not include price endings in their considerations because the costs of doing so outweigh the benefits. The model is tested employing a data set consisting of catalog prices, characteristics of goods and advertising traits. We find that the pattern of "just-below" pricing is consistent with both profit-maximizing producers and utility-maximizing consumers.

Suggested Citation

  • John Huston & Nipoli Kamdar, 1996. "$9.99: Can "Just-Below" Pricing Be Reconciled with Rationality?," Eastern Economic Journal, Eastern Economic Association, vol. 22(2), pages 137-145, Spring.
    • Handle: RePEc:eej:eeconj:v:22:y:1996:i:2:p:137-145
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume22/V22N2P137_145.pdf
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    Citations

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    Cited by:

    1. Snir, Avichai & Chen, Haipeng (Allan) & Levy, Daniel, 2022. "Zero-Ending Prices, Cognitive Convenience, and Price Rigidity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue Forthcomi, pages 1-39.
    2. Snir, Avichai & Levy, Daniel, 2021. "If You Think 9-Ending Prices Are Low, Think Again," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 6(1 (Forthc).

    More about this item

    Keywords

    Consumer; Pricing; Rationality;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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