Price Endings Research Articles

Book Review

The widespread use of prices ending with a 9 (e.g. $7.99) is well documented in the Western context, particularly in North America. However, price ending is somewhat different in Asian cultures, with the overrepresentation of 8-ending prices. The rationale behind such practice is generally not well understood in the hospitality industry. Thus, the aim of this study is to explore managerial beliefs regarding price ending strategies in Asia, particularly Chinese speaking communities. Semi-structured interviews were conducted with prominent hospitality leaders in Macao. Results from thematic analysis of the interview data indicated four common reasons for employing 8-ending prices: a) luck & fortune, b) market norm; c) appealing; d) value image. These findings should extend existing theoretical explanations for 8-ending prices beyond quality and value image to provide useful reference price ending strategies for the hospitality industry.

Potential for Cost Saving with Iclaprim Owing to Avoidance of Vancomycin-Associated Acute Kidney Injury in Hospitalized Patients with Acute Bacterial Skin and Skin Structure Infections.

Vancomycin is the most prescribed antibiotic for hospitalized adults with skin and skin structure infections. Vancomycin is associated with acute kidney injury. Iclaprim is an antibiotic under development for the treatment of patients with acute bacterial skin and skin structure infections and is not associated with acute kidney injury. This economic model sought to determine the potential cost saving with iclaprim owing to avoidance of vancomycin-associated acute kidney injury among hospitalized patients with acute bacterial skin and skin structure infections. A hospital cost-minimization model was developed to estimate the overall cost impact of replacing empiric vancomycin with iclaprim among hospitalized adult patients with skin and skin structure infections. The structural model included: vancomycin acquisition; vancomycin assay; incidence of vancomycin-associated acute kidney injury; excess hospital length of stay if acute kidney injury occurred; frequency/cost of specialty physician consults after occurrence of acute kidney injury; and probability/cost of acute dialysis as a result of acute kidney injury. Iclaprim treatment duration was 7days and iclaprim acquisition cost was varied to determine the upper end of the daily iclaprim price that still conferred cost savings relative to vancomycin. Duration of hospitalization for iclaprim was assumed to be the same as patients with no acute kidney injury. Based on the overall acute kidney injury rate (9.2%), the neutral acquisition price threshold for iclaprim vs. vancomycin was US$1373.47/regimen. Across various subpopulations where acute kidney injury risk ranged between 9.2 and 16.7%, the daily iclaprim acquisition cost that still conferred cost savings was up to US$300/day. Iclaprim has the potential to reduce the economic burden of acute bacterial skin and skin structure infections in hospitalized patients at risk for vancomycin-associated acute kidney injury when iclaprim acquisition is US$300/day or less.

Round-number biases and informed trading in global markets

This paper investigates whether informed trading matters to round-number biases. We document the global presence of round-number biases by showing excessive buying (selling) pressure immediately below (above) a rounded threshold. Additionally, we demonstrate that trades surrounding 0-ending prices are likely to be initiated by informed traders who tend to buy (sell) at 9-ending (1-ending) prices. Moreover, small-sized (medium-sized) trades with 1-ending or 9-ending prices are revealed to be more informative and conducted persistently. Collectively, these findings seem to suggest that informed investors strategically engage in stealth trading by leveraging round-number biases of liquidity traders, which indirectly drives this anomaly in global markets.

Lucky 8-ending – A case study on managerial price-ending beliefs in Macao

Abstract The widespread use of prices ending with a 9 (e.g. $7.99) is well documented in the Western context, particularly in North America. However, price ending is somewhat different in Asian cultures, with the overrepresentation of 8-ending prices. The rationale behind such practice is generally not well understood in the hospitality industry. Thus, the aim of this study is to explore managerial beliefs regarding price ending strategies in Asia, particularly Chinese speaking communities. Semi-structured interviews were conducted with prominent hospitality leaders in Macao. Results from thematic analysis of the interview data indicated four common reasons for employing 8-ending prices: a) luck & fortune, b) market norm; c) appealing; d) value image. These findings should extend existing theoretical explanations for 8-ending prices beyond quality and value image to provide useful reference price ending strategies for the hospitality industry.

An Empirical Study on the Problems of the Reconstruction Charge System

An Empirical Study on the Problems of the Reconstruction Charge System

Does impact of price endings differ for the non-green and green products? Role of product categories and price levels

PurposeThe discount image associated with odd-ending prices has led to its extensive use by retailers. The purpose of this study is to assess the impacts and applications of nine-ending vs round-ending prices on the purchase of green and non-green products at different price levels and under different purchase motivations.Design/methodology/approachThree experiments are conducted. The first experiment is a 2 (price ending: nine-ending vs round-ending) × 2 (product appeal: green vs non-green) between-subjects study; the second experiment is a 2 (price ending: nine-ending vs round-ending) × 2 (price level: low price vs high price) × 2 (product appeal: green vs non-green) between-subjects study; and the third experiment examined buyers’ preferences of price endings regarding the purchase of green products having either utility (utilitarian) or pleasure (hedonic) motivation.FindingsThis research highlights that consumers prefer zero-ending prices for green products and pleasure motivation products, but they prefer odd endings for low-priced and utilitarian products. These results support the increased reception of round-ending prices. Accordingly, this study contributes to the literature by providing a boundary condition for odd-ending prices. Specifically, the study finds that the effect of nine-ending prices becomes weaker as the price of the product increases.Practical implicationsThe findings of this study have practical implications for managers, as the results indicate that pricing green products and high-quality perception products using round digits and pricing low-priced and utility perception products using odd digits will increase consumers’ purchase intentions. Moreover, pricing the products using round-ending prices will reduce the perception of low quality and deter brand loyalty emanating from a low-priced/discount image of a product.Originality/valueThis research contributes to theoretical and practical aspects of behavioural pricing literature. This research uncovers the buyers’ distinct preferences for zero-ending prices and odd-ending prices when purchasing different products based on different motivations and varied price levels. This is the first research of its kind to explore and compare the impact of psychological pricing on green products. The study also resolves a contradiction in past literature regarding the use of nine-ending prices by providing boundary conditions.

Third decimal place odd prices trigger competition: evidence from the Italian retail gasoline market

ABSTRACTRecent literature shows that in the US gasoline prices are higher in locations using more odd prices (particularly those ending in five and nine digits), since they coarse the pricing grid and act as a focal collusive point. We replicate this analysis for the Italian market, obtaining the opposite result. Since the rightmost digit of the retail gasoline prices in Italy is the third and not the second decimal place, coarsening the pricing grid is not sufficient to support a collusive behaviour.

A high-frequency analysis of price resolution and pricing barriers in equities on the adoption of a new currency

ABSTRACTWe use ultra high frequency (trade by trade) data to demonstrate that equity price clustering and pricing predictability around psychologically important prices in Greece switches away from drachma-focused with the introduction of the euro, but does not immediately switch to euro-clustering. The change in trader price focus around the euro introduction addresses an open debate in the clustering literature on whether the presence of clustering is a bias related to the current prices or anchoring to past prices. Our findings of a decline in drachma clustering, but lack of switch to euro effects supports the case for clustering being a trading feature that is slow to transfer to new pricing regimes. A key advantage of the ultra high frequency dataset is we are also able to demonstrate the presence of psychological pricing barriers related to each currency that are not detectable in daily data.

Australia: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Australia

This 2017 Article IV Consultation highlights that Australia has enjoyed a comparatively robust economic performance while adjusting to the end of the commodity price and mining investment booms of the 2000s. The recovery from these shocks has advanced further in 2017. Aggregate demand has been led by strong public investment growth amid a boost in infrastructure spending and private business investment has picked up, but private consumption growth has remained subdued. Employment growth has strengthened markedly over the year, although the economy is not yet back at full employment. Wage growth is weak and inflation is below its target range. The macroeconomic policy stance has become more supportive with the infrastructure investment boost.

Value co-creation in a sharing economy: The end of price wars?

The growing phenomenon of the sharing economy facilitates collaborative production and consumption, which highlights the concept of value co-creation. The current study aims to investigate the role of value co-creation in a sharing economy with an examination of consumers’ willingness to pay a premium price. Three types of functional, social, and emotional co-created values were explored through an online survey that focused on the pre-consumption, mid-consumption, and post-consumption stages. Four hundred and ninety-nine valid surveys were collected. The results showed that activities that involve functional and social values in the pre-consumption stage are stimulators of paying a premium price. In the mid-consumption stage, emotional value is also important for customers. However, in the post-consumption stage, only social-value-based activities are associated with willingness to pay a premium price.

Round prices and price rigidity: Evidence from outlawing odd prices

This paper exploits a legal change in Israel that banned the use of non-zero-digit price endings (e.g., 6.99) to study the relationship between digit price endings and price rigidity. We compare the propensity of product prices to change before and after the ban, while distinguishing between products whose prices ended with a zero and products whose prices did not end with a zero digit before the ban. We find that before the ban, zero-digit price endings were more likely to change, typically upward, compared with products with non-zero digit price endings. After the legal change these differences disappeared. Overall, these findings support the Price Point Theory (Blinder, 1991).

Do Price Barriers Exist in the European Carbon Market?

ABSTRACTIt is generally thought that psychological prices in markets primarily traded by professional participants should play a limited role. The authors investigate the existence of key reference points in the European Carbon Market, which can be considered as a market with highly qualified stakeholders. They document the presence of key levels and barrier bands around European Union Allowances (EUA) prices. It appears that traders tend to consider these price levels as resistances in upward movements and as supports in downward movements. Furthermore, the authors have observed that the existence of price barriers affects both return and volume dynamics. Therefore, the results indicate that there exist certain EUA prices that do, in fact, modify the behavior of European Carbon Market participants.

Do subjects from high and low context cultures attribute different meanings to tourism services with 9-ending prices?

Four symbolic meanings have been associated with 9-ending prices: Discount price, enhanced value, low quality, and misleading action. Scales were developed to measure each meaning and the relative strength of these meanings in influencing tourists' purchases among samples from the U.S., Korea and China was investigated. The analyses found no differences in the likelihood of tourists selecting 9-ending rather than even-ending prices when purchasing a sandwich, a pizza or show tickets; in their relative importance across cultures; or in the influence on purchase decisions of different symbolic meanings associated with 9-endings. However, a 9-ending discount was perceived to be more effective when compared to even-ended price discounts in the context of a hotel room. Again, however, its effectiveness could not be explained by the different symbolic meanings associated with 9-ending prices.

The effect of odd price, hedonic goods, price consciousness, and purchase justification on purchase intention

본 연구는 단수가격이 효과적으로 작동하는 제품범주, 소비자의 성향과 구매상황을 파악하기 위해 2개의 실험을 실시했다. 실험 1은 제품유형, 가격유형, 가격의식을 독립변수로 선정하고 종속변수로 구매의도를 측정했다. 실험결과, 단수가격이 실용재보다 쾌락재에 책정되었을 때 더욱 효과적이고, 그 효과가 가격의식이 높은 소비자에게 더욱 컸다. 단수가격이 가진 저렴한 느낌이 쾌락재 구매를 정당화시키고 구매의도를 높여주는데, 가격의식이 높은 소비자는 저렴한 가격을 특히 선호하기 때문에 쾌락재 구매 시 단수가격의 효과가 두드러졌다. 실험 2는 쾌락재 구매정당화, 가격유형을 독립변수로 선정하고 종속변수로 구매의도를 측정했다. 실험결과, 쾌락재 구매의 정당화가 불가능한 상황에서는 단수가격이 구매의도를 높이는 반면, 쾌락재 구매의 정당화가 가능한 상황에서는 좋은 느낌을 주는 라운드가격이 구매의도를 높였다.

The use of odd-ending numbers in the pricing of five tourism services in three different cultures

The study measured the extent to which the 1 through 9 digits were used as price endings by suppliers of five tourism services in three different cultures represented by New York City, Seoul, and Shanghai. Four results emerged. The first confirmed the hypothesis, but the other three results were contrary to expectations. First, 9 and 8-ending prices were dominant in New York City and in Shanghai, respectively. Second, these culture specific endings were complemented by the universality of the 0 and 5- digit endings of prices which were ranked first and second, respectively, in Seoul, second and third in Shanghai, and third and second in New York. Third, 9-ending prices were not used more frequently when they resulted in a lowering of the leftmost digit. Fourth, dominant cultural specific price endings were not used more frequently in lower than in higher priced tourism services.

Currency Substitution and Price Endings: Right Digit Effect

ABSTRACTThe strategic manipulation of prices. rightmost digits has been a tactic used by retailers in the western world for decades. By studying the internationalization of pricing tactics in a global economy, our research adds a much needed contribution to the literature of price endings and pricing tactics in global markets. We find that at lower price levels, consumers exposed to a 99 ending price in a currency substitution market are more likely to purchase the product compared to consumers in the US market. At higher price levels, on the other hand, consumers in either market situation exhibit no change in purchase intentions. Thus, the 99 ending tactic has no effect on consumers when the product is expensive. The use of the right digit effect by managers in a currency substitution/ dollarized economy as a way of persuading consumers to buy is still likely to be more successful compared to the USA market. As such, firms in a dollarized economy should structure their pricing strategies while taking into consideration the type of product they are offering and the consumer market they are dealing with.

End of 9-endings, price recall, and price perceptions

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.

Eastern versus Western Culture Pricing Strategy: Superstition, Lucky Numbers, and Localization

Eastern versus Western culture pricing practices differ with respect to price endings; however, Eastern cultures are increasingly influenced by Western multinational corporations. At the same time, increasing antiglobalization sentiment suggests the use of localization strategies in these markets. The authors investigate whether pricing practices still differ in this new environment, examine the role of superstition, and ask whether Western brands can benefit from localizing pricing practices. They explore the use of lucky number price endings and consumer responses to such pricing strategies in Singapore, an Eastern culture that is strongly exposed to Western multinational influence. Using a content analysis of newspaper advertisements and two experiments, the authors find that superstitious pricing practices continue, especially with high-priced items and brands of Eastern (vs. Western) origin. In the experimental studies, they find that superstitious pricing has a positive effect on price attractiveness and that foreign brands that localize their prices benefit from a more positive brand attitude.

End of 9-Endings and Price Perceptions

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 parliament has passed a law prohibiting the use of non 0-ending prices. We find that one year after 9-ending prices have disappeared, 90-ending prices acquired the same status as 9-ending prices had before the law was passed. 90-ending prices became the new psychological price points. The retailers and the shoppers both reacted to the regulatory intervention optimally, which has eliminated the regulation’s intended effect.

The impact of psychological pricing strategy on consumers' buying behaviour: a qualitative study

The recognition of consumers' behaviour is crucial for effective marketing plans. Evidences explain that the psychological pricing communicates meaning to consumers. This study theoretically examines the impact of psychological pricing on consumers' buying behaviour. The study has used secondary data from research papers, monographs, theses, popular articles, and newspapers. Findings show that socio demographic factors like age, income, education, gender, lifestyle, family size, reference groups, social roles and status and the psychological patterns like representativeness, availability of products and the anchoring heuristics are key factors which influence consumers' buying behaviour. Additionally, the consumers, who are more price cognisant are more probable to select nine-ending prices. Indeed, low involved customers, those with a small hedonic and symbolic attachment profile, low educated, low income and younger customers are prone to select the nine-ending priced products and services. The findings can have implications for retailers, pricing managers, researchers, academicians, society and government.