End of 9-Endings, Price Recall, and Price Perceptions
15 Pages Posted: 4 Apr 2017
Date Written: April 2, 2017
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: Suggested Citation