Monday, May 27, 2019

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

 

Not all price endings are created equal: Price points and asymmetric price rigidity
 
By: 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.
Keywords: Asymmetric Price Adjustment, Sticky/Rigid Prices, 9-Ending Prices, Psychological Prices, Price Points, Regular/Sale Prices
   
   
URL: http://d.repec.org/n?u=RePEc:rim:rimwps:19-02&r=com

https://lawprofessors.typepad.com/antitrustprof_blog/2019/05/not-all-price-endings-are-created-equal-price-points-and-asymmetric-price-rigidity.html

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