Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity

231 Pages Posted: 19 Jan 2019

See all articles by Daniel Levy

Daniel Levy

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

Avichai Snir

Bar Ilan University - Department of Economics

Alex Gotler

Open University of Israel

Haipeng (Allan) Chen

University of Kentucky - Gatton College of Business and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 3, 2019

Abstract

We document an asymmetry in the rigidity of 9-ending prices relative to non-9-ending prices. Consumers have difficulty noticing higher prices if they are 9-ending, or noticing price-increases if the new prices are 9-ending, because 9-endings are used as a signal for low prices. Price setters respond strategically to the consumer-heuristic by setting 9-ending prices more often after price-increases than after price-decreases. 9-ending prices, therefore, remain 9-ending more often after price-increases than after price-decreases, leading to asymmetric rigidity: 9-ending prices are more rigid upward than downward. These findings hold for both transaction-prices and regular-prices, and for both inflation and no-inflation periods.

Keywords: Asymmetric Price Adjustment, Sticky/Rigid Prices, 9-Ending Prices, Psychological Prices, Price Points, Regular/Sale Prices

JEL Classification: E31, L16, C91, C93, D80, M31

Suggested Citation

Levy, Daniel and Snir, Avichai and Gotler, Alex and Chen, Haipeng (Allan), Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity (January 3, 2019). Journal of Monetary Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3311738

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/

Avichai Snir

Bar Ilan University - Department of Economics ( email )

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

Alex Gotler

Open University of Israel ( email )

Tel Aviv 61392
Israel

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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