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Do psychological prices contribute to price rigidity? Evidence from German scanner data on food brands

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  • Roland Herrmann

    (Institute of Agricultural Policy and Market Research, University of Giessen, Senckenbergstr. 3, D-35390 Giessen, Germany)

  • Anke Moeser

    (Institute of Nutrition Science, University of Giessen, Senckenbergstr. 3, D-35390 Giessen, Germany)

Abstract

A substantial degree of price rigidity has been reported for branded foods in various studies with scanner data. One possible explanation for price rigidity is the existence of psychological pricing points. The authors analyze to what extent psychological pricing plays a role in grocery retailing and whether it contributes to the price rigidity of branded foods in Germany. Psychological pricing-defined here as just-below-the-round-figure-pricing-is empirically analyzed with scanner data of weekly prices for 20 food brands in 38 retail outlets from September 1996 to June 1999. Psychological pricing turned out to be extremely important in German food retailing. Branded food prices are remarkably sticky and psychological pricing points contribute strongly to price rigidity. Other factors like the sales phenomenon and firm-specific effects are additionally important. [EconLit Classifications: Q110, Q130]. © 2006 Wiley Periodicals, Inc. Agribusiness 22: 51-67, 2006.

Suggested Citation

  • Roland Herrmann & Anke Moeser, 2006. "Do psychological prices contribute to price rigidity? Evidence from German scanner data on food brands," Agribusiness, John Wiley & Sons, Ltd., vol. 22(1), pages 51-67.
    • Handle: RePEc:wly:agribz:v:22:y:2006:i:1:p:51-67
    DOI: 10.1002/agr.20075
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    References listed on IDEAS

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    1. Daniel Hosken & David Reiffen, 2001. "Multiproduct retailers and the sale phenomenon," Agribusiness, John Wiley & Sons, Ltd., vol. 17(1), pages 115-137.
    2. Herrmann, Roland & Moser, Anke, 2003. "Price Variability Or Rigidity In The Food-Retailing Sector? Theoretical Analysis And Evidence From German Scanner Data," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25867, International Association of Agricultural Economists.
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    5. Elizabeth Powers & Nicholas Powers, 2001. "The Size and Frequency of Price Changes: Evidence from Grocery Stores," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 18(4), pages 397-416, June.
    6. Carlton, Dennis W, 1986. "The Rigidity of Prices," American Economic Review, American Economic Association, vol. 76(4), pages 637-658, September.
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    8. Schindler, Robert M & Kirby, Patrick N, 1997. "Patterns of Rightmost Digits Used in Advertised Prices: Implications for Nine-Ending Effects," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 24(2), pages 192-201, September.
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    Cited by:

    1. Craigwell, Roland & Moore, Winston & Worrell, DeLisle, 2011. "Does Consumer Price Rigidity Exist in Barbados?," MPRA Paper 40928, University Library of Munich, Germany.
    2. Leandro Meller & Juan M.C. Larrosa & Juan I. Uriarte & Gonzalo R. Ramírez Muñoz de Toro, 2023. "Argentinian Retail Coffee Market: Effects of Instability on Pricing," Working Papers 266, Red Nacional de Investigadores en Economía (RedNIE).
    3. Möser, Anke & Kriep, Laura, 2014. "Bequeme Preise im Quickservice-Bereich," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 63(02), pages 1-13, June.
    4. Möser, A. & Herrmann, R., 2006. "Die Bedeutung psychologischer Preisschwellen in Preisstrategien des Lebensmitteleinzelhandels," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 41, March.
    5. Sascha A. Weber & Sven M. Anders, 2007. "Price rigidity and market power in German retailing," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 737-749.
    6. Möser, Anke & Kriep, Laura, 2014. "Bequeme Preise im Quickservice-Bereich," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 63(2).
    7. Carlo Russo & Rachael Goodhue, 2018. "Farmgate prices, retail prices, and supermarkets' pricing decisions: An integrated approach," Agribusiness, John Wiley & Sons, Ltd., vol. 34(1), pages 24-43, December.
    8. Luca Cacchiarelli & Alessandro Sorrentino, 2019. "Pricing Strategies in the Italian Retail Sector: The Case of Pasta," Social Sciences, MDPI, vol. 8(4), pages 1-13, April.
    9. Herrmann, Roland & Möser, Anke & Weber, Sascha A., 2009. "Grocery retailing in Germany: Situation, development and pricing strategies," Discussion Papers 41, Justus Liebig University Giessen, Center for international Development and Environmental Research (ZEU).
    10. Mirela Martinčić & Dijana Vuković & Anica Hunjet, 2022. "Consumer Responses to Selected Activities: Price Increases, Lack of Product Information and Numerical Way of Expressing Product Prices," JRFM, MDPI, vol. 15(6), pages 1-19, June.

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