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Two plus two equals six: an alternative explanation of why so many goods prices end in nine

  • David Demery
  • Nigel W. Duck

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    The prevalence of prices ending in 99 cents is explained as the result of rational consumers rounding prices up. Monopolists are shown to be harmed by this practice whereas consumers may gain. The model is compared with two other models: Basu's (1997) model and one which assumes consumers round prices down.

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    File URL: http://www.efm.bris.ac.uk/economics/working_papers/pdffiles/dp07598.pdf
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    Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 07/598.

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    Length: 11 pages
    Date of creation: Jul 2007
    Date of revision:
    Handle: RePEc:bri:uobdis:07/598
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    1. Kaushik Basu, 2006. "Consumer Cognition and Pricing in the Nines in Oligopolistic Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 125-141, 03.
    2. Basu, Kaushik, 1997. "Why are so many goods priced to end in nine? And why this practice hurts the producers," Economics Letters, Elsevier, vol. 54(1), pages 41-44, January.
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