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Journal Articles
Publisher: Journals Gateway
The Review of Economics and Statistics (2011) 93 (4): 1417–1431.
Published: 01 November 2011
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We study the link between price points and price rigidity using two data sets: 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.
Includes: Supplementary data
Journal Articles
Publisher: Journals Gateway
The Review of Economics and Statistics (2004) 86 (2): 514–533.
Published: 01 May 2004
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We study the price adjustment practices and provide quantitative measurement of the managerial and customer costs of price adjustment using data from a large U.S. industrial manufacturer and its customers. We find that price adjustment costs are a much more complex construct than the existing industrial-organization or macroeconomics literature recognizes. In addition to physical costs ( menu costs ), we identify and measure three types of managerial costs (information gathering, decision-making, and communication costs) and two types of customer costs (communication and negotiation costs). We find that the managerial costs are more than 6 times, and customer costs are more than 20 times, the menu costs. In total, the price adjustment costs comprise 1.22% of the company's revenue and 20.03% of the company's net margin. We show that many components of the managerial and customer costs are convex, whereas the menu costs are not. We also document the link between price adjustment costs and price rigidity. Finally, we provide evidence of managers' fear of antagonizing customers. I have no answer to the question of how to measure these menu change costs, but these [menu cost] theories will never be taken seriously until an answer is provided. Edward Prescott (1987, p. 113) Given the large number of theoretical papers that evaluate the implications of [price] adjustment costs, obtaining direct evidence that such costs are present seems crucial. Margaret Slade (1998, p. 104)