Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/37316
Authors: 
Kummer, Michael E.
Hackl, Franz
Winter-Ebmer, Rudolf
Year of Publication: 
2010
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Empirical Industrial Organization G9-V1
Abstract: 
Basu (2006) argues that the prevalence of 99 cent prices in shops can be explained with rational consumers who disregard the rightmost digits of the price. This bounded rational behaviour leads to a Bertrand equilibrium with positive markups. We use data from an Austrian price comparison site and find results highly compatible with Basu's theory. We can show that price points - in particular prices ending in 9 - are prevalent and have significant impact on consumer demand. Moreover, these price points are sticky; neither the price-setter itself wants to change them neither the rivals do underbid these prices, if they represent the cheapest price on the market.
JEL: 
L11
D41
C41
Document Type: 
Conference Paper

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