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End of 9-Endings and Price Perceptions

Author

Listed:
  • Haipeng (Allan) Chen

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

  • Daniel Levy

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

  • Avichai Snir

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

Abstract

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 parliament has passed a law prohibiting the use of non 0-ending prices. We find that one year after 9-ending prices have disappeared, 90-ending prices acquired the same status as 9-ending prices had before the law was passed. 90-ending prices became the new psychological price points. The retailers and the shoppers both reacted to the regulatory intervention optimally, which has eliminated the regulation's intended effect.

Suggested Citation

  • Haipeng (Allan) Chen & Daniel Levy & Avichai Snir, 2017. "End of 9-Endings and Price Perceptions," Working Paper series 17-04, Rimini Centre for Economic Analysis.
    • Handle: RePEc:rim:rimwps:17-04
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    File URL: http://www.rcea.org/RePEc/pdf/wp17-04.pdf
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    References listed on IDEAS

    as
    1. Mark Stiving, 2000. "Price-Endings When Prices Signal Quality," Management Science, INFORMS, vol. 46(12), pages 1617-1629, December.
    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. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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. 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).
    2. Diego Aparicio & Roberto Rigobon, 2020. "Quantum Prices," NBER Working Papers 26646, National Bureau of Economic Research, Inc.
    3. 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).
    4. 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.
    5. Hahn, Volker & Marenčák, Michal, 2020. "Price points and price dynamics," Journal of Monetary Economics, Elsevier, vol. 115(C), pages 127-144.
    6. 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.
    7. 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.

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    More about this item

    Keywords

    9-ending prices; psychological price points; sticky prices; rigid prices; price recall; price control; price regulation; integer constraint;
    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

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