End of 9-Endings, Price Recall, and Price Perceptions

15 Pages Posted: 4 Apr 2017

See all articles by Avichai Snir

Avichai Snir

Bar Ilan University - Department of Economics

Daniel Levy

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

Haipeng (Allan) Chen

University of Kentucky - Gatton College of Business and Economics

Date Written: April 2, 2017

Abstract

Prices that end with 9, also known as psychological price points, are common, comprising about 70% of the retail prices. They are also more rigid than other prices. 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 government passed a new regulation prohibiting the use of non 0-ending prices, bringing an end to 9-ending prices. We find that seven months after 9-ending prices have disappeared, 90-ending prices acquired the same status as 9-ending prices had before the new regulation was adopted. Thus, 90-ending prices became the new psychological price points, partially eliminating the regulation’s intended effect.

Keywords: 9-Ending Prices, Psychological Price Points, Price Recall, Price Perception, Sticky Prices, Rigid Prices, Price Rigidity, Price Sickiness, Price Flexibility, Level Effect, Left-Digit Effect, Image Effect, Right-Digit Effect, Integer Constraint, Price Control, Price Regulation

JEL Classification: E31, L16, K20, D40, D83, L81, M21, M31

Suggested Citation

Snir, Avichai and Levy, Daniel and Chen, Haipeng (Allan), End of 9-Endings, Price Recall, and Price Perceptions (April 2, 2017). Economics Letters, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2944919

Avichai Snir

Bar Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+972 3 736 0835 (Phone)
+972 3 535 3180 (Fax)

Daniel Levy (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 5290002
Israel
+972 3 531-8345 (Phone)
+972 3 738-4034 (Fax)

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

Emory University - Department of Economics ( email )

1602 Fishburne Drive, Suite 306
Rich Building
Atlanta, GA 30322-0001
United States

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

Rimini Center for Economic Analysis ( email )

Wilfrid Laurier University
75 University Ave W.
Waterloo, Ontario N2L3C5
Canada

HOME PAGE: http://rcea.org/

Haipeng (Allan) Chen

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

550 South Limestone
Lexington, KY 40506
United States

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