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A field experiment on the effect of .99 price endings

Author

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  • Antonio FILIPPIN

Abstract

The paper investigates the effect of . 99 price endings on consumer demand by means of a field experiment. Results tail behind other contributions showing how . 99 endings can be ineffective, casting doubts on their widespread use among retailers. When the . 99 ending price is removed an increase of sales emerges from descriptive statistics as well as a in multivariate framework in which only sales of the treated item are analyzed. However, such a counterintuitive effect does not survive in a diffs-in-diffs model in which also the daily sales of all the relevant substitutes are analyzed. Since a common shock at the time of the treatment does not emerge, the interpretation is that a different elasticity of demand drives the relative increase of sales during the treatment, when prices of the substitutes are on average higher. Once the different reactions to price changes are taken into account, the treated item does not display significantly higher sales as compared to its substitutes when the . 99 ending price is removed.

Suggested Citation

  • Antonio FILIPPIN, 2009. "A field experiment on the effect of .99 price endings," Departmental Working Papers 2009-026, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    • Handle: RePEc:mil:wpdepa:2009-026
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    More about this item

    Keywords

    Price ending; field experiment;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising

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