Price Points and Price Rigidity

63 Pages Posted: 20 Oct 2008 Last revised: 29 May 2012

See all articles by Daniel Levy

Daniel Levy

Bar-Ilan University - Department of Economics; Emory University - Department of Economics; Rimini Center for Economic Analysis

Dongwon Lee

Korea University Business School

Haipeng (Allan) Chen

University of Kentucky - Gatton College of Business and Economics

Robert J. Kauffman

Singapore Management University; Singapore Management University - School of Information Systems

Mark E. Bergen

University of Minnesota - Carlson School of Management

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Abstract

We study the link between price points and price rigidity, using two datasets containing over 100 million observations. We find that (i) 9 is the most frequently used price-ending for the penny, dime, dollar and ten-dollar digits, (ii) 9-ending prices are between 24%-73% less likely to change in comparison to non-9-ending prices, (iii) the average size of the price change is higher if it ends with 9 in comparison to non-9-ending prices, and (iv) the most common price changes are multiples of dimes, dollars, and ten-dollars. We conclude that price points might constitute a substantial source of retail price rigidity.

Keywords: Price Point, 9-Ending Price, Price Rigidity, Consumer Inattention

JEL Classification: E31, L16, D80, M21, M30

Suggested Citation

Levy, Daniel and Lee, Dongwon and Chen, Haipeng (Allan) and Kauffman, Robert J. and Bergen, Mark E., Price Points and Price Rigidity. Emory Law and Economics Research Paper No. 08-34, Bar Ilan Univ. Pub Law Working Paper No. 09-01, Available at SSRN: https://ssrn.com/abstract=1287157 or http://dx.doi.org/10.2139/ssrn.1287157

Daniel Levy (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 5290002
Israel
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+972 3 738-4034 (Fax)

HOME PAGE: http://econ.biu.ac.il/en/levy

Emory University - Department of Economics ( email )

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HOME PAGE: http://economics.emory.edu/home/people/faculty/Levydaniel.html

Rimini Center for Economic Analysis ( email )

Wilfrid Laurier University
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Waterloo, Ontario N2L3C5
Canada

HOME PAGE: http://rcea.org/

Dongwon Lee

Korea University Business School ( email )

Anam-Dong, Seongbuk-Gu
Seoul, 136701
Korea, Republic of (South Korea)

HOME PAGE: http://dongwon.info

Haipeng (Allan) Chen

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States

Robert J. Kauffman

Singapore Management University ( email )

Li Ka Shing Library
70 Stamford Road
Singapore 178901, 178899
Singapore
65-6828-929 (Phone)

Singapore Management University - School of Information Systems ( email )

80 Stamford Road
Singapore, 178902
Singapore

Mark E. Bergen

University of Minnesota - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
612-624-1821 (Phone)

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