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Effects of $9 Price Endings on Retail Sales: Evidence from Field Experiments

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  • Eric Anderson

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  • Duncan Simester

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Abstract

Although the use of $9 price endings is widespread amongst US retailers there is little evidence of their effectiveness. In this paper, we present a series of three field-studies in which price endings were experimentally manipulated. The data yield two conclusions. First, use of a $9 price ending increased demand in all three experiments. Second, the increase in demand was stronger for new items than for items that the retailer had sold in previous years. There is also some evidence that $9 price endings are less effective when retailers use “Sale” cues. Together, these results suggest that $9-endings may be more effective when customers have limited information, which may in turn help to explain why retailers do not use $9 price endings on every item. Copyright Kluwer Academic Publishers 2003

Suggested Citation

  • Eric Anderson & Duncan Simester, 2003. "Effects of $9 Price Endings on Retail Sales: Evidence from Field Experiments," Quantitative Marketing and Economics (QME), Springer, vol. 1(1), pages 93-110, March.
  • Handle: RePEc:kap:qmktec:v:1:y:2003:i:1:p:93-110
    DOI: 10.1023/A:1023581927405
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    File URL: http://hdl.handle.net/10.1023/A:1023581927405
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    References listed on IDEAS

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    1. Eric T. Anderson & Duncan I. Simester, 2001. "Are Sale Signs Less Effective When More Products Have Them?," Marketing Science, INFORMS, vol. 20(2), pages 121-142, March.
    2. J. Jeffrey Inman & Leigh McAlister, 1993. "A Retailer Promotion Policy Model Considering Promotion Signal Sensitivity," Marketing Science, INFORMS, vol. 12(4), pages 339-356.
    3. Stiving, Mark & Winer, Russell S, 1997. " An Empirical Analysis of Price Endings with Scanner Data," Journal of Consumer Research, Oxford University Press, vol. 24(1), pages 57-67, June.
    4. Inman, J Jeffrey & McAlister, Leigh & Hoyer, Wayne D, 1990. " Promotion Signal: Proxy for a Price Cut?," Journal of Consumer Research, Oxford University Press, vol. 17(1), pages 74-81, June.
    5. Schindler, Robert M. & Wiman, Alan R., 1989. "Effects of odd pricing on price recall," Journal of Business Research, Elsevier, vol. 19(3), pages 165-177, November.
    6. Schindler, Robert M & Kirby, Patrick N, 1997. " Patterns of Rightmost Digits Used in Advertised Prices: Implications for Nine-Ending Effects," Journal of Consumer Research, Oxford University Press, vol. 24(2), pages 192-201, September.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Freakonomics economist asked people to flip 20,000 virtual coins to make big life decisions — here’s what he found
      by ? in Business Insider on 2016-08-13 20:57:42

    Citations

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    Cited by:

    1. Chague, Fernando Daniel & De-Losso, Rodrigo & Giovannetti, Bruno Cara, 2018. "Individuals neglect the informational role of prices: evidence from the stock market," Textos para discussão 467, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    2. Cardella, Eric & Seiler, Michael J., 2016. "The effect of listing price strategy on real estate negotiations: An experimental study," Journal of Economic Psychology, Elsevier, vol. 52(C), pages 71-90.
    3. Daniel Levy & Dongwon Lee & Haipeng (Allan) Chen & Robert J. Kauffman & Mark Bergen, 2011. "Price Points and Price Rigidity," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1417-1431, November.
    4. Raj Chetty & Adam Looney & Kory Kroft, 2009. "Salience and Taxation: Theory and Evidence," American Economic Review, American Economic Association, vol. 99(4), pages 1145-1177, September.
    5. Marco Bertini & Luc Wathieu, 2008. "Research Note—Attention Arousal Through Price Partitioning," Marketing Science, INFORMS, vol. 27(2), pages 236-246, 03-04.
    6. Pope, Devin G. & Pope, Jaren C. & Sydnor, Justin R., 2015. "Focal points and bargaining in housing markets," Games and Economic Behavior, Elsevier, vol. 93(C), pages 89-107.
    7. List, John A. & Reiley, David, 2008. "Field Experiments in Economics: Palgrave Entry," IZA Discussion Papers 3273, Institute for the Study of Labor (IZA).
    8. Chen, Haipeng (Allan) & Levy, Daniel & Snir, Avichai, 2017. "End of 9-Endings and Price Perceptions," MPRA Paper 76342, University Library of Munich, Germany.
    9. Levitt, Steven D. & List, John A., 2009. "Field experiments in economics: The past, the present, and the future," European Economic Review, Elsevier, vol. 53(1), pages 1-18, January.
    10. Rieko Ishii, 2014. "Bid Roundness Under Collusion in Japanese Procurement Auctions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(3), pages 241-254, May.
    11. Kaushik Basu, 2004. "Consumer Cognition and Pricing in the 9's in Oligopolistic Markets," Harvard Institute of Economic Research Working Papers 2053, Harvard - Institute of Economic Research.
    12. Snir, Avichai & Levy, Daniel & Chen, Haipeng (Allan), 2017. "End of 9-endings, price recall, and price perceptions," Economics Letters, Elsevier, vol. 155(C), pages 157-163.
    13. Hackl, Franz & Kummer, Michael E. & Winter-Ebmer, Rudolf, 2014. "99 Cent: Price points in e-commerce," Information Economics and Policy, Elsevier, vol. 26(C), pages 12-27.
    14. repec:eee:regeco:v:68:y:2018:i:c:p:172-190 is not listed on IDEAS
    15. Aalto-Setälä, Ville & Schindler, Robert M., 2006. "The importance of attractive prices in pricing dynamics," Research Discussion Papers 30/2006, Bank of Finland.
    16. Edward S. Knotek, 2010. "The roles of price points and menu costs in price rigidity," Research Working Paper RWP 10-18, Federal Reserve Bank of Kansas City.
    17. Pradeep K. Chintagunta & Harikesh S. Nair, 2011. "Structural Workshop Paper --Discrete-Choice Models of Consumer Demand in Marketing," Marketing Science, INFORMS, vol. 30(6), pages 977-996, November.
    18. Fernando Chague & Rodrigo De Losso, Bruno Giovannetti, 2017. "The Price Tag Illusion," Working Papers, Department of Economics 2017_31, University of São Paulo (FEA-USP).
    19. Eric Cardella & Michael J. Seiler, 2016. "The Effect of Listing Price Strategy on Real Estate Negotiations: An Experimental Study," Framed Field Experiments 00623, The Field Experiments Website.
    20. Eric T. Anderson & Duncan I. Simester, 2008. "—Does Demand Fall When Customers Perceive That Prices Are Unfair? The Case of Premium Pricing for Large Sizes," Marketing Science, INFORMS, vol. 27(3), pages 492-500, 05-06.
    21. Asmus Olsen, 2013. "The politics of digits: evidence of odd taxation," Public Choice, Springer, vol. 154(1), pages 59-73, January.
    22. repec:eee:jeborg:v:144:y:2017:i:c:p:188-203 is not listed on IDEAS
    23. Lynn, Michael & Flynn, Sean Masaki & Helion, Chelsea, 2013. "Do consumers prefer round prices? Evidence from pay-what-you-want decisions and self-pumped gasoline purchases," Journal of Economic Psychology, Elsevier, vol. 36(C), pages 96-102.

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    Keywords

    price ending; odd-pricing; pricing; catalogs;

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