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A field experiment on the effect of .99 price endings

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  • Antonio FILIPPIN

Abstract

The paper investigates the effect of . 99 price endings on consumer demand by means of a field experiment. Results tail behind other contributions showing how . 99 endings can be ineffective, casting doubts on their widespread use among retailers. When the . 99 ending price is removed an increase of sales emerges from descriptive statistics as well as a in multivariate framework in which only sales of the treated item are analyzed. However, such a counterintuitive effect does not survive in a diffs-in-diffs model in which also the daily sales of all the relevant substitutes are analyzed. Since a common shock at the time of the treatment does not emerge, the interpretation is that a different elasticity of demand drives the relative increase of sales during the treatment, when prices of the substitutes are on average higher. Once the different reactions to price changes are taken into account, the treated item does not display significantly higher sales as compared to its substitutes when the . 99 ending price is removed.

Suggested Citation

  • Antonio FILIPPIN, 2009. "A field experiment on the effect of .99 price endings," Departmental Working Papers 2009-26, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    • Handle: RePEc:mil:wpdepa:2009-26
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    File URL: http://wp.demm.unimi.it/files/wp/2009/DEMM-2009_026wp.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. Kaushik Basu, 2006. "Consumer Cognition and Pricing in the Nines in Oligopolistic Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 125-141, March.
    4. Hackl, Franz & Kummer, Michael E. & Winter-Ebmer, Rudolf, 2014. "99 Cent: Price points in e-commerce," Information Economics and Policy, Elsevier, vol. 26(C), pages 12-27.
    5. 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.
    6. 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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    More about this item

    Keywords

    Price ending; field experiment;

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising

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