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Quantum prices

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  • Aparicio, Diego
  • Rigobon, Roberto

Abstract

Many retailers practice an extreme form of discrete pricing defined as quantum prices: differentiated products are priced using few and sparse price buckets. To show this, online data was collected for 350,000 products from over 65 fashion retailers in the U.S. and the U.K. This pricing strategy is observed within categories and across categories (i.e., similar or even disparately distinct products like jeans and bags have an identical price), as well as in product introductions, where new products come in at previous price buckets. Normalized indices indicate substantial price clustering after controlling for popular prices, convenient prices, assortment size, or digit endings. Quantum prices have implications for price adjustments through product shares, markdown prices, and for the law-of-one-price. A behavioral model of price salience and recall is discussed.

Suggested Citation

  • Aparicio, Diego & Rigobon, Roberto, 2023. "Quantum prices," Journal of International Economics, Elsevier, vol. 143(C).
    • Handle: RePEc:eee:inecon:v:143:y:2023:i:c:s0022199623000569
    DOI: 10.1016/j.jinteco.2023.103770
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    More about this item

    Keywords

    Behavioral pricing; Price frictions; Salience; Recall; Cross-country retail;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • E7 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics

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