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Price Points and Price Rigidity

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Listed:
  • Daniel Levy

    (Bar-Ilan University, Emory University and RCEA)

  • Dongwon Lee

    (Korea University)

  • Haipeng (Allan) Chen

    (Texas A&M University)

  • Robert J. Kauffman

    (Singapore Management University)

  • Mark Bergen

    (University of Minnesota)

Abstract

We study the link between price points and price rigidity using two data sets: weekly scanner data and Internet data. We find that “9” is the most frequent ending for the penny, dime, dollar, and ten-dollar digits; the most common price changes are those that keep the price endings at “9”; 9-ending prices are less likely to change than non-9-ending prices; and the average size of price change is larger for 9-ending than non-9-ending prices. We conclude that 9-ending contributes to price rigidity from penny to dollar digits and across a wide range of product categories, retail formats, and retailers. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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  • 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.
  • Handle: RePEc:tpr:restat:v:93:y:2011:i:4:p:1417-1431
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    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General

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