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Not all price endings are created equal: Price points and asymmetric price rigidity

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  • Daniel Levy

    () (Department of Economics, Bar-Ilan University, Israel; Department of Economics, Emory University, USA; Rimini Centre for Economic Analysis)

  • Avichai Snir

    (Department of Banking & Finance, Netanya Academic College, Israel)

  • Alex Gotler

    (Department of Education and Psychology, Open University, Israel)

  • Haipeng (Allan) Chen

    (Gatton College of Business and Economics, University of Kentucky, USA)

Abstract

We document an asymmetry in the rigidity of 9-ending prices relative to non-9-ending prices. Consumers have difficulty noticing higher prices if they are 9-ending, or noticing price-increases if the new prices are 9-ending, because 9-endings are used as a signal for low prices. Price setters respond strategically to the consumer-heuristic by setting 9-ending prices more often after price-increases than after price-decreases. 9-ending prices, therefore, remain 9-ending more often after price-increases than after price-decreases, leading to asymmetric rigidity: 9-ending prices are more rigid upward than downward. These findings hold for both transaction-prices and regular-prices, and for both inflation and no-inflation periods.

Suggested Citation

  • Daniel Levy & Avichai Snir & Alex Gotler & Haipeng (Allan) Chen, 2019. "Not all price endings are created equal: Price points and asymmetric price rigidity," Working Paper series 19-02, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:19-02
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    Cited by:

    1. Daniel Levy & Avichai Snir, 2017. "Potterian Economics," Working Papers 002-17 JEL Codes: A13, A1, International School of Economics at TSU, Tbilisi, Republic of Georgia.
    2. repec:eee:jeborg:v:144:y:2017:i:c:p:188-203 is not listed on IDEAS

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    Keywords

    Asymmetric Price Adjustment; Sticky/Rigid Prices; 9-Ending Prices; Psychological Prices; Price Points; Regular/Sale Prices;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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