Tuesday, May 3, 2011

Price Points and Price Rigidity

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.


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