Tuesday, May 3, 2011
Posted by D. Daniel Sokol
Daniel Levy (Department of Economics, Bar Ilan University and RCEA), Dongwon Lee (Korea University), Haipeng (Allan) Chen (Texas A&M University), Robert J. Kauffman (Arizona State University) and Mark Bergen (University of Minnesota) address Price Points and Price Rigidity.
ABSTRACT: We study the link between price points and price rigidity, using two datasets: weekly scanner data, and Internet data. We find that: “9” is the most frequent ending for the penny, dime, dollar and ten-dollar digits; the most common price changes are those that keep the price endings at “9”; 9-ending prices are less likely to change than non-9-ending prices; and the average size of price change is larger for 9-ending than non-9-ending prices. We conclude that 9-ending contributes to price rigidity from penny to dollar digits, and across a wide range of product categories, retail formats and retailers.