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End of 9-Endings, Price Recall, and Price Perceptions

Author

Listed:
  • Avichai Snir

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

  • Daniel Levy

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

  • Haipeng (Allan) Chen

    (Mays Business School, Texas A&M University, USA)

Abstract
Prices that end with 9, also known as psychological price points, are common, comprising about 70% of the retail prices. They are also more rigid than other prices. We take advantage of a natural experiment to document an emergence of a new price ending that has the same effects as 9-endings. In January 2014, the Israeli government passed a new regulation prohibiting the use of non 0-ending prices, bringing an end to 9-ending prices. We find that seven months after 9-ending prices have disappeared, 90-ending prices acquired the same status as 9-ending prices had before the new regulation was adopted. Thus, 90-ending prices became the new psychological price points, partially eliminating the regulation’s intended effect.

Suggested Citation

  • Avichai Snir & Daniel Levy & Haipeng (Allan) Chen, 2017. "End of 9-Endings, Price Recall, and Price Perceptions," Working Paper series 17-08, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:17-08
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    References listed on IDEAS

    as
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    2. Levy, Daniel & Lee, Dongwon & Chen, Haipeng (Allan) & Kauffman, Robert J. & Bergen, Mark, 2011. "Price Points and Price Rigidity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 93(4), pages 1417-1431.
    3. Chen, Haipeng (Allan) & Levy, Daniel & Ray, Sourav & Bergen, Mark, 2008. "Asymmetric Price Adjustment in the Small," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 55(4), pages 728-737.
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    6. Stiving, Mark & Winer, Russell S, 1997. "An Empirical Analysis of Price Endings with Scanner Data," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 24(1), pages 57-67, June.
    7. Eric Anderson & Duncan Simester, 2003. "Effects of $9 Price Endings on Retail Sales: Evidence from Field Experiments," Quantitative Marketing and Economics (QME), Springer, vol. 1(1), pages 93-110, March.
    8. Eric Anderson & Nir Jaimovich & Duncan Simester, 2015. "Price Stickiness: Empirical Evidence of the Menu Cost Channel," The Review of Economics and Statistics, MIT Press, vol. 97(4), pages 813-826, October.
    9. Anil K Kashyap, 1995. "Sticky Prices: New Evidence from Retail Catalogs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(1), pages 245-274.
    10. Schindler, Robert M & Kirby, Patrick N, 1997. "Patterns of Rightmost Digits Used in Advertised Prices: Implications for Nine-Ending Effects," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 24(2), pages 192-201, September.
    11. Manoj Thomas & Vicki Morwitz, 2005. "Penny Wise and Pound Foolish: The Left-Digit Effect in Price Cognition," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 32(1), pages 54-64, June.
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    Citations

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    Cited by:

    1. Edward S. Knotek & Doron Sayag & Avichai Snir, 2019. "The Effects of Price Endings on Price Rigidity: Evidence from VAT Changes," Working Papers 19-24, Federal Reserve Bank of Cleveland.
    2. Ortega, Ana M. & Tabares, Felipe A., 2023. "Psychological pricing: Myth or reality? The impact of nine-ending prices on purchasing attitudes and brand revenue," Journal of Retailing and Consumer Services, Elsevier, vol. 71(C).
    3. Diego Aparicio & Roberto Rigobon, 2020. "Quantum Prices," NBER Working Papers 26646, National Bureau of Economic Research, Inc.
    4. Snir, Avichai & Levy, Daniel, 2021. "If You Think 9-Ending Prices Are Low, Think Again," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 6(1 (Forthc).
    5. Ater, Itai & Gerlitz, Omri, 2017. "Round prices and price rigidity: Evidence from outlawing odd prices," Journal of Economic Behavior & Organization, Elsevier, vol. 144(C), pages 188-203.
    6. Hahn, Volker & Marenčák, Michal, 2020. "Price points and price dynamics," Journal of Monetary Economics, Elsevier, vol. 115(C), pages 127-144.
    7. Levy, Daniel & Snir, Avichai & Gotler, Alex & Chen, Haipeng (Allan), 2020. "Not all price endings are created equal: Price points and asymmetric price rigidity," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue forthcomi.
    8. Ray, Sourav & Snir, Avichai & Levy, Daniel, 2023. "Retail Pricing Format and Rigidity of Regular Prices," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 1-1.
    9. Aparicio, Diego & Rigobon, Roberto, 2023. "Quantum prices," Journal of International Economics, Elsevier, vol. 143(C).
    10. Karim M. Abadir, 2011. "Is the economic crisis over (and out)?," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 3(2), pages 102-108, October.

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    More about this item

    Keywords

    9-ending prices; psychological price points; price recall; price perception; sticky prices; rigid prices; price rigidity; price flexibility; price stickiness; level effect; left-digit effect; image effect; right-digit effect; integer constraint; price control; price regulation;
    All these keywords.

    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
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • 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
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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