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If You Think 9-Ending Prices Are Low, Think Again

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  • Snir, Avichai
  • Levy, Daniel

Abstract

9-ending prices, which comprise between 40%–95% of retail prices, are popular because shoppers perceive them as being low. We study whether this belief is justified using scanner price-data with over 98-million observations from a large US grocery-chain. We find that 9-ending prices are higher than non 9-ending prices, by as much as 18%. Two factors explain why shoppers believe, mistakenly, that 9-ending prices are low. First, we find that among sale-prices, 9-ending prices are indeed lower than non 9-ending prices, giving 9-ending prices an aura of being low. Second, at first, 9-ending prices were indeed lower than other prices. Shoppers, therefore, learned to associate 9-endings with low prices. Over time, however, 9-ending prices rose substantially, which shoppers failed to notice, because the continuous use of 9-ending prices for promoting deep price cuts draws shoppers’ attention to them, and helps to maintain-and-preserve the image of 9-ending prices as bargain prices.

Suggested Citation

  • Snir, Avichai & Levy, Daniel, 2019. "If You Think 9-Ending Prices Are Low, Think Again," MPRA Paper 96614, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:96614
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Behavioral Pricing; Psychological Prices; Price Perception; Image Effect; 9-Ending Prices; Price Points; Regular Prices; Sale Prices; Sale Filter;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • 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
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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