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0.001% and Counting: Revisiting the Price Rounding Tax

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  • Sayag, Doron
  • Snir, Avichai
  • Levy, Daniel

Abstract

In 1991 and 2008, Israel abolished the equivalents of 1¢ and 5¢ coins, respectively, effectively eliminating low-denomination coins and introducing rounding in cash transactions. When totals were rounded up, shoppers incurred a small rounding tax. Using detailed data on price endings and basket sizes across supermarkets, drugstores, small groceries, and convenience stores, we estimate that the magnitude of the rounding tax borne by Israeli consumers averaged only 0.001%–0.002% of revenues in the fast-moving consumer goods markets. These findings have implications for the ongoing debate regarding the desirability and viability of abolishing the 1¢ and 5¢ coins in the US.

Suggested Citation

  • Sayag, Doron & Snir, Avichai & Levy, Daniel, 2025. "0.001% and Counting: Revisiting the Price Rounding Tax," MPRA Paper 126714, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:126714
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    References listed on IDEAS

    as
    1. Snir, Avichai & Chen, Haipeng (Allan) & Levy, Daniel, 2022. "Zero-Ending Prices, Cognitive Convenience, and Price Rigidity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 203, pages 519-542.
    2. Levy, Daniel & Lee, Dongwon & Chen, Haipeng (Allan) & Kauffman, Robert J. & Bergen, Mark, 2011. "Price Points and Price Rigidity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 93(4), pages 1417-1431.
    3. Ray, Sourav & Snir, Avichai & Levy, Daniel, 2023. "Retail Pricing Format and Rigidity of Regular Prices," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 1-1.
    4. Shy, Oz, 2020. "How currency denomination and the ATM affect the way we pay," Journal of Economics and Business, Elsevier, vol. 111(C).
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    8. 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.
    9. Snir, Avichai & Levy, Daniel, 2021. "If You Think 9-Ending Prices Are Low, Think Again," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 6(1 (Forthc).
    10. Christina Cheung, 2018. "Eliminating the Penny in Canada: An Economic Analysis of Penny-Rounding on Grocery Items," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 46(2), pages 231-239, June.
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    14. Andrew Keinsley, 2013. "Do You Mind if I Round?: Eliminating the Penny A Structural Analysis," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201309, University of Kansas, Department of Economics.
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    JEL classification:

    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • M30 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - General

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