Price Points and Price Rigidity

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