Price Developments after a Nominal Shock: Benford's Law and Psychological Pricing after the Euro Introduction

Posted: 23 Feb 2011

See all articles by Tarek Josef el Sehity

Tarek Josef el Sehity

Institute of Cognitive Sciences and Technologies; Institute of Psychology

Erik Hoelzl

University of Cologne

Erich Kirchler

University of Vienna - Faculty of Psychology

Date Written: 2005

Abstract

Retail managers use psychological pricing to make the prices of goods appear to be just below a round number. The euro introduction in 2002, with its various exchange rates, distorted existing nominal price patterns while at the same time retaining real prices. We studied consumer prices before and after the euro introduction by using Benford's Law as a benchmark for price adjustments. Results indicate the usefulness of this benchmark for detecting irregularities in prices, and a clear trend towards psychological pricing after the nominal shock of the euro introduction. In addition, the tendency towards psychological prices results in different inflation rates in dependence of the price pattern.

Keywords: retail pricing, price endings, digital analysis

JEL Classification: E31

Suggested Citation

el Sehity, Tarek Josef and Hoelzl, Erik and Kirchler, Erich, Price Developments after a Nominal Shock: Benford's Law and Psychological Pricing after the Euro Introduction (2005). International Journal of Research in Marketing (IJRM), Vol. 4, No. 22, pp. 471-480, 2005, Available at SSRN: https://ssrn.com/abstract=702821

Tarek Josef El Sehity (Contact Author)

Institute of Cognitive Sciences and Technologies ( email )

Via San Martino della Battaglia 44
Roma, RM 00185
Italy

HOME PAGE: http://cnr-it.academia.edu/TarekelSehity

Institute of Psychology ( email )

Freudplatz 1
Vienna, 1020
Austria
+43 664 7394 9337 (Phone)
+43 1 798 40 98 20 (Fax)

HOME PAGE: http://www.sehity.com

Erik Hoelzl

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Erich Kirchler

University of Vienna - Faculty of Psychology ( email )

Universitaetsstrasse 7
Vienna, A-1010
Austria
+43 1 42 7747332 (Phone)
+43 1 42 7747339 (Fax)

HOME PAGE: http://homepage.univie.ac.at/erich.kirchler

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