Convenient Prices and Price Rigidity: Cross-Sectional Evidence
Edward S. Knotek II
Federal Reserve Bank of Kansas City
January 1, 2010
FRB of Kansas City Research Working Paper No. 08-04
This paper provides cross-sectional evidence of convenient prices -- prices that simplify and expedite transactions and thereby reduce the time costs from physically making a transaction. I propose that firms may wish to set convenient prices for items that: (1) are typically purchased with cash; (2) are sold alone or with a few similar items; and (3) are high-traffic transactions, i.e., require queuing or are purchased very frequently. I find broad support for the use of convenient prices in locations where making a rapid transaction is important. Convenience also appears to predominantly affect goods and services with above-average price rigidity.
Number of Pages in PDF File: 42
Keywords: Convenient prices, price rigidity, price points, 9-ending prices
JEL Classification: E31, D11, D21, C2, L11, M31working papers series
Date posted: November 1, 2008 ; Last revised: March 12, 2013
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