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Convenient Prices and Price Rigidity: Cross-Sectional Evidence

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  • Edward S. Knotek

    (Federal Reserve Bank of Kansas City)

Abstract

This paper provides cross‐sectional evidence of convenient prices—prices that simplify and expedite transactions, reducing the time costs from physically making a transaction. Firms may wish to set convenient prices for items that are typically purchased with cash, are sold alone or with a few similar items, and are high‐traffic transactions, that is, that require queuing or are frequently purchased. I collect a new data set and 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. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Edward S. Knotek, 2011. "Convenient Prices and Price Rigidity: Cross-Sectional Evidence," The Review of Economics and Statistics, MIT Press, vol. 93(3), pages 1076-1086, August.
  • Handle: RePEc:tpr:restat:v:93:y:2011:i:3:p:1076-1086
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    References listed on IDEAS

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    4. Knotek II, Edward S., 2008. "Convenient prices, currency, and nominal rigidity: Theory with evidence from newspaper prices," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1303-1316, October.
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    Cited by:

    1. Avichai Snir & Daniel Levy, 2011. "Shrinking Goods and Sticky Prices: Theory and Evidence," Working Papers 2011-03, Bar-Ilan University, Department of Economics.
    2. Yuriy Gorodnichenko & Oleksandr Talavera, 2017. "Price Setting in Online Markets: Basic Facts, International Comparisons, and Cross-Border Integration," American Economic Review, American Economic Association, vol. 107(1), pages 249-282, January.
    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. Avichai Snir & Daniel Levy & Alex Gotler & Haipeng (Allan) Chen, 2012. "Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity," Working Paper series 69_12, Rimini Centre for Economic Analysis.
    5. Daniel Levy & Avichai Snir, 2013. "Shrinking Goods," Emory Economics 1303, Department of Economics, Emory University (Atlanta).
    6. Mark Witte & Rachel Williams, 2014. "Duopolists’ Retail Pricing Behavior in Multiple Markets," Journal of Industry, Competition and Trade, Springer, vol. 14(1), pages 67-81, March.
    7. repec:rim:rimwps:04-07 is not listed on IDEAS
    8. 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.
    9. Bouhdaoui, Y. & Bounie, D. & François, A., 2014. "Convenient prices, cash payments and price rigidity," Economic Modelling, Elsevier, vol. 41(C), pages 329-337.
    10. repec:eee:ecmode:v:70:y:2018:i:c:p:127-139 is not listed on IDEAS
    11. repec:eee:jeborg:v:144:y:2017:i:c:p:188-203 is not listed on IDEAS
    12. repec:eee:ecmode:v:69:y:2018:i:c:p:38-48 is not listed on IDEAS
    13. Knotek II, Edward S., 2008. "Convenient prices, currency, and nominal rigidity: Theory with evidence from newspaper prices," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1303-1316, October.

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