Price Points and Price Rigidity

Daniel Levy, Bar-Ilan University and RCEA
Dongwon Lee, Korea University
Haipeng (Allan) Chen, Texas A&M University
Robert J. Kauffman, Arizona State University
Mark Bergen, University of Minnesota

Abstract. We study the link between price points and price rigidity, using two datasets: weekly scanner data, and Internet data. We find that: “9” is the most frequent ending for the penny, dime, dollar and ten-dollar digits; the most common price changes are those that keep the price endings at “9”; 9-ending prices are less likely to change than non-9-ending prices; and the average size of price change is larger for 9-ending than non-9-ending prices. We conclude that 9-ending contributes to price rigidity from penny to dollar digits, and across a wide range of product categories, retail formats and retailers.

JEL Codes: E31, L16, D80, M21, M30

Keywords: Price Point, 9-Ending Price, Price Rigidity