99 Cent: Price Points in E-Commerce

Title: 99 Cent: Price Points in E-Commerce
Format: Journal Article
Publication Date: March 2014
Description:

Setting prices ending in nines is a common feature of many markets for consumer products. This prevalence has been explained either by a specific image of such price points or by the exploitation of rational inattention on the part of the consumers who want to economize on the cost of information processing. We use data from an Austrian price comparison site and find a remarkable prevalence of such price setting. Prices ending with nine are also sticky: price-setters change them with a significantly lower probability; rivals underbid these prices more seldom if they represent the cheapest price on the market, and we observe higher price jumps by price leaders for these price points. Finally, we explore the impact of these price points on the consumers’ demand.

Ivan Allen College Contributors:
External Contributors: Franz Hackl, Rudolf Winter-Ebmer
Citation:

Hackl, Franz, Michael E. Kummer, and Rudolf Winter-Ebmer. "99 Cent: Price Points in E-Commerce." Information Economics and Policy 26 (2014): 12-27.

Categories:
  • Applied Econometrics
  • Applied Microeconomics
  • Digitization, InfoTechs, and Social Networks
  • Firm Strategy
  • Industrial Organization
Related Links:
Related Departments:
  • School of Economics