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Psychological Pricing. Private vs. Professional Vendors

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  • T. Van Caneghem

Abstract

Prior research in marketing documents the prevalence of so-called psychological (or odd) pricing. Unlike earlier studies that focused on prices of professional vendors, we also consider prices of private vendors in our analyses. Relying on a sample of prices for second-hand cars and employing three alternative ways to bare the phenomenon, our results present unequivocal evidence of psychological pricing being significantly more common among prices of professional vendors. Moreover, whereas findings based on all three methods are consistent with odd pricing for the sub-sample of professional vendors, only one method yields significant indications of psychological pricing for the sub-sample of private vendors. Consistent with humans’ reliance upon cognitive reference points, zeroes are found to dominate prices of both professional and private vendors. Nevertheless, round prices are significantly more common among private vendors. Our findings also indicate that private vendors tend to round their posted number of kilometers significantly more often, whereas professional vendors seem to provide more accurate numbers of kilometers. Finally, we provide some evidence of professional vendors strategically setting their sales prices just below pre-defined price thresholds that can be used to narrow search results in the online database employed for the current study.

Suggested Citation

  • T. Van Caneghem, 2008. "Psychological Pricing. Private vs. Professional Vendors," Review of Business and Economic Literature, KU Leuven, Faculty of Economics and Business, Review of Business and Economic Literature, vol. 0(4), pages 475-489.
  • Handle: RePEc:ete:revbec:20080405
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    File URL: http://feb.kuleuven.be/rebel/jaargangen/2001-2010/2008/RBE%202008-4/2008-4%20-%20Van%20Caneghem.pdf
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    More about this item

    Keywords

    Psychological pricing; odd pricing; cognitive reference points;

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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