Journal article
Zero-ending prices, cognitive convenience, and price rigidity
Journal of economic behavior & organization, Vol.203, pp.519-542
11/2022
DOI: 10.1016/j.jebo.2022.09.018
Abstract
•We show that 0-ending prices are popular and rigid at convenience stores.•We use 3 datasets: two retail price datasets from the US, and CPI data from Israel.•Existing explanations rely on transaction convenience 0-ending prices offer.•We argue and show that cognitive convenience is relevant and important as well.•We show that cognitive convenience of 0-ending prices leads to higher demand.
We assess the role of cognitive convenience in the popularity and rigidity of 0-ending prices in convenience settings. Studies show that 0-ending prices are common at convenience stores because of the transaction convenience that 0-ending prices offer. Using large store-level retail CPI data, we find that 0-ending prices are popular and rigid at convenience stores even when they offer little transaction convenience. We corroborate these findings with two large retail scanner price datasets from Dominick's and Nielsen. In Dominick's data, we find that there are more 0-endings in the prices of the items in the front-end candies category than in any other category, even though these prices do not affect the convenience of the consumers' check-out transaction. In addition, in both Dominick's and Nielsen's datasets, we find that 0-ending prices have a positive effect on demand. Ruling out consumer antagonism and retailers’ use of heuristics in pricing, we conclude that 0-ending prices are popular and rigid, and that they increase demand in convenience settings, not only for their transaction convenience but also for the cognitive convenience they offer.
Details
- Title: Subtitle
- Zero-ending prices, cognitive convenience, and price rigidity
- Creators
- Avichai Snir - Bar-Ilan UniversityHaipeng (Allan) Chen - University of KentuckyDaniel Levy - Bar-Ilan University
- Resource Type
- Journal article
- Publication Details
- Journal of economic behavior & organization, Vol.203, pp.519-542
- Publisher
- Elsevier B.V
- DOI
- 10.1016/j.jebo.2022.09.018
- ISSN
- 0167-2681
- eISSN
- 1879-1751
- Language
- English
- Date published
- 11/2022
- Academic Unit
- Marketing
- Record Identifier
- 9984618523902771
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