Convenient Prices and Price Rigidity: Cross-Sectional Evidence

FRB of Kansas City Research Working Paper No. 08-04

42 Pages Posted: 1 Nov 2008 Last revised: 12 Mar 2013

See all articles by Edward S. Knotek

Edward S. Knotek

Federal Reserve Banks - Federal Reserve Bank of Cleveland

Date Written: January 1, 2010

Abstract

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.

Keywords: Convenient prices, price rigidity, price points, 9-ending prices

JEL Classification: E31, D11, D21, C2, L11, M31

Suggested Citation

Knotek, Edward S., Convenient Prices and Price Rigidity: Cross-Sectional Evidence (January 1, 2010). FRB of Kansas City Research Working Paper No. 08-04. Available at SSRN: https://ssrn.com/abstract=1291864 or http://dx.doi.org/10.2139/ssrn.1291864

Edward S. Knotek (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Cleveland ( email )

East 6th & Superior
Cleveland, OH 44101-1387
United States

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