The 99 price ending as a signal of a low-price appeal

There is evidence that the rightmost digits, or endings, of retail prices can communicate meanings to consumers. To better understand how such meanings are formed, this paper addresses the question of how the 99 price ending can have a low-price meaning even though 99-ending prices tend to be higher rather than lower competitive prices. Analysis of two large samples of newspaper price advertising indicates that there is a strong and robust correlation between the use of the 99 price ending and the presence of a low-price appeal such as a claimed discount. It is suggested that the salience of price advertising leads it to dominate other sources of information in the consumer's learning of price-ending meanings.     

高价值农产品价格的波动特征与传导效应——基于中国荔枝市场的经验研究

借助2012—2019年中国荔枝龙眼产业技术体系的公开价格数据,采用时间序列相关模型对荔枝产业链上下游价格的波动特征与传导效应进行实证分析。研究表明,收购价格和零售价格存在波动集聚的特征,收购价格波动存在负的非对称性。收购价格和零售价格之间存在格兰杰因果关系,且相互影响具有一定的时滞性。从短期看,零售价格受到收购价格冲击的影响更大;从中长期看,零售价格对收购价格的冲击持续时间更长。     

Price–Quality and Market Share of Consumer Goods in Spain: Retail Brands and Manufacturer Brands1

The development of retail brands has been favoured by the creation of large chains and by the high level of business concentration in the retail sector. It has been supported by an increasing number of consumers who are aware of value and consider that retail brand is the best alternative, with quality levels similar to those of leading manufacturer brands but with lower prices. In this survey, we analyse the price differentials between manufacturer brands and retail brands in several categories of widely consumed products. We study the relationship between the price differential and the mean category price with the market share of retail brands, for foodstuff, perfumes and cleaning materials categories. Finally, we determine the possible connection between the price of a consumer good brand and its real quality.     

Temporal Reframing of Prices: When Is It Beneficial?

Prior studies provide mixed results pertaining to the effectiveness of temporal reframing of prices. This study examines the conditions in which such temporal reframing to a shorter period of time is more or less beneficial than aggregate prices. Investigations of the role of four moderating variables—price endings, price level, time periods, and calculation affinity—show that reframed prices are more beneficial than aggregate prices for high-priced products, especially in combination with even price endings, an aggregate price that normally refers to a comparatively short time period, or customers with poor calculation affinity. Aggregate prices offer more benefits than reframed prices for low-priced products, odd price endings, aggregate prices that refer to longer periods, and customers with excellent calculation affinities.     

Robustness of an Intermittent Program of Comparative Retail Food Price Information

This study compares the distribution of food-item market basket prices across stores and relative to a local newspaper retail food price report. Distributions of prices for market baskets comprised of national brands and cheapest alternative brands coincided closely with the intermittent retail food price report. This suggests that consumer organizations with limited resources can produce comparative food-store price reports that provide useful information to consumers.     

Price-matching guarantees as signals of low store prices: survey and experimental evidence

Many retailers offer a price-matching guarantee that promises to pay consumers the difference if they find a lower price elsewhere. This article proposes that the effectiveness of a price-matching guarantee as a signal of low store prices depends on individuals’ beliefs about the degree to which other consumers in the market engage in price search, enforce price-matching guarantees, or both. Consistent with signaling theory, results of a survey and two experimental studies demonstrate that market level factors affect consumer beliefs about the extent to which others engage in price search and thereby the effectiveness of price-matching guarantees in lowering perceptions of store prices. The implications of the findings for retail strategy are discussed along with directions for future research.     

Effects of shopping information on consumers’ responses to comparative price claims

This article describes three studies that examine the effects of shopping information on consumers’ responses to comparative price claims in retail advertisements. Results of the studies show that 1) the opportunity to shop across retail stores reduces the effect of comparative price claims on consumers’ estimates of lowest price for a particular item, but has less impact on their estimates of the store’s regular price; 2) access to advertising from competing retailers has the same pattern of effects; and 3) across exposure to a series of ad claims, these effects generalize from estimates of specific item prices to judgments of the store’s general pricing. For branded shopping goods, the results show that comparative price claims may prove counterproductive for retail advertisers by leading consumers to believe that the store’s regular prices are high without convincing them that its sale prices are low.     

Integrative effects of firms' price and endorsement strategies on consumers' loyalty intention

This research examines the effects of price and brand endorsement that are adopted by firms from a consumer-based viewpoint, and provides practical brand management discussions as a reference for both manufacturer brands and retail store brands. According to the findings, manufacturer brands support high prices and boost those vivid impressions which are helpful in engendering consumer loyalty intention. Without a careful evaluation process, a brand-endorsing strategy may prove detrimental to the manufacturer. Retail store brands follow distinct pricing policies and carry out brand-endorsed strategies. Price/endorsement stimuli influence consumer brand loyalty through the partial mediating effect of brand impression. Manufacturers and retailers could define appropriate price premiums on products with a potential for a manufacturer–retailer brand co-branding as identified by market research, thus increasing the sales of both.     

Currency Substitution and Price Endings: Right Digit Effect

ABSTRACT

The 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.     

Pricing dynamics in US fresh produce channels: new empirical evidence

Despite many valuable contributions, prior research has not completely explained retail pricing behavior. This study employs scanner data for 36 fresh produce items analyzing the relationship between costs of goods sold and retail prices to provide further insight into retail pricing behavior. Implications include: (1) where ‘natural’ variation in produce prices do not already exist from the supplier, retailers appear to introduce the variation themselves, independent from shipping point price; and (2) to the extent that supplier-retailer contracts for fresh produce develop, the resulting stabilizing influence on costs may have the preserve effect of increasing retail price variability to consumers.     

Retail Market Power in a Shopping Basket Model of Supermarket Competition

Supermarket retailers typically operate with relatively low margins, suggesting a highly competitive retail environment. However, despite the fact that consumers purchase an entire shopping basket at a time from supermarkets, this evidence is largely based on models of retail competition with single-category purchases. In this paper, we develop and test an empirical model of retail price competition that explicitly accounts for the effect of demand complementarity among items in consumer shopping baskets. Relative to the case where consumers purchase products with independent demands, we demonstrate that equilibrium prices are higher for all items when retailers take demand-complementarity into account. Our findings indicate that non-price strategies intended to encourage complementarity, such as co-merchandising, strategic shelf-positioning, or featuring complementary goods tend to soften price competition, and lead to higher equilibrium prices.     

Price-setting Behavior and Competition in Developing Countries: an Analysis of Retail Outlets in Lesotho

We study the relationship between price-setting behavior and the degree of competition in a setting where markets and information flows are relatively imperfect. Using a unique dataset that combines survey data on retail outlets in Lesotho, and detailed historical information on their product prices, we find a non-monotonic relationship between the frequency of price changes and perceived competition, measured by the number of reported competitors. This non-monotonic relationship is consistent with a model of increasing costs of coordinating price changes under tacit collusion with few competitors, and a breakdown of collusion at higher levels of competition. By exploring the nature of the relationship between competition and price rigidity, our study has implications for macroeconomic and competition policy, and underscores the scope for interaction between the two.     

E-book pricing and vertical restraints

This paper empirically analyzes how the use of vertical price restraints has impacted retail prices in the market for e-books. In 2010, five of the six largest publishers simultaneously adopted the agency model of book sales, allowing them to directly set retail prices. This led the Department of Justice to file suit against the publishers in 2012, the settlement of which prevents the publishers from interfering with retailers’ ability to set e-book prices. Using a unique dataset of daily e-book prices for a large sample of books across major online retailers, we exploit cross-publisher variation in the timing of the return to the wholesale model to estimate its effect on retail prices. We find that e-book prices for titles that were previously sold using the agency model decreased by 18 percent at Amazon and 8 percent at Barnes & Noble. Our results are robust to different specifications, placebo tests, and synthetic control groups. Our findings illustrate a case where upstream firms prefer to set higher retail prices than retailers and help to clarify conflicting theoretical predictions on agency versus wholesale models.     

Retail channel price discrimination

This paper examines price differentials of identical items across retail channels. Many consumer packaged goods are sold through both grocery and drug stores. Liquor is unique in that in much of the country there is a third retail channel of distribution, liquor stores. If consumers in each retail channel differ in their willingness to pay for certain items, then sellers can exploit those differences and charge different prices for the same items in each channel. We examine a unique data set of pooled cross sectional retail scanner data on wine to test whether sellers use retail channel to identify heterogeneous consumer market segments and engage in price discrimination. We begin by presenting a model of price discrimination by retail channel along with behavioural assumptions regarding shoppers in each channel. Next we examine sales by retail channel and find persistent price differentials for the same item across retail channel after controlling for sample selection bias and seasonality. Lastly, we estimate the price elasticity of demand correcting for endogeneity and find differences across channel consistent with the price differentials. The extent of price differential, however, differs significantly with respect to price point.     

Menu price endings that communicate value and quality

This paper investigates the extent to which restaurant marketers use the price endings .00 and .09 to communicate quality and value images, and whether consumers use those price endings as information cues when choosing where to dine out. The experimental data shows that marketers probably rely on price cues and that consumers use those cues. Moreover, many other researchers have found that there is a perceived relationship between prices ending in 0 and overall quality, and prices ending in 9 and overall value. This paper discusses three theories that might explain why consumers associate the price endings 0 and 9 with quality and value: the Schemer Schema Intuitive theory, the Persuasion Knowledge Model, and signaling theory. Those theories suggest that consumers learn from the behavior of marketers and that consumers use their intuition, persuasion knowledge, and coping behavior to interpret, evaluate, and adapt to the marketers' pricing practices.     

Evaluation of Alternative Market Channels for Farm-Raised Catfish

Abstract

Catfish producers have traditionally marketed catfish to centralized processing plants that eviscerate and fillet the fish for distribution to the food service sector and to retail markets. However, low prices offered by the processing plants since December of 2001 have fallen short of the breakeven costs for some farmers. Developing alternative marketing channels that offer higher prices to catfish producers have been suggested to help improve farmers' revenue by spreading price risks. The objective of this study was to examine the effect of alternative marketing channels and average size on the average price of farm-raised catfish. The results of this analysis suggest that catfish farmers can increase the average price received for live food-sized catfish by decreasing the percentage of fish marketed to processing plants and live haulers, while increasing the percentage of fish marketed to retail outlets in an average size range of 0.57 kg to 0.90 kg. This can be achieved with on-farm value-added processing. However, retail outlets are relatively limited and may not provide a solution to large-scale producers of the catfish farming industry.     

Red price? Red flag! Eye-tracking reveals how one red price can hurt a retailer

Retailers present prices in red color to signal savings. Past research has shown that presenting all prices in red increases perceived savings from the store. However, in practice, retailers often present just one price in red in promotion materials with multiple prices. Will consumers perceive higher savings from the store even if only one price is presented in red? This research examines this prevalent retail practice using a theoretical lens. The theoretical framework predicts that two unique learned associations with red color (red: Savings and red: Stop) play a key role in shaping consumers' perception of savings from stores that highlight only one price in red. This research proposes and empirically demonstrates that consumers perceive lower savings from stores that present only one price in red. The theoretical framework is validated using a multi-method approach that combines the strengths of behavioral and physiological (eye-tracking) methods. Findings from this research suggest that presenting only one price in red lowers perceived savings from the store, which may hurt sales.     

Price Transmission and Threshold Behavior in the African Catfish Supply Chain in Uganda

Abstract

The issue of price linkage in the catfish supply chain in Uganda is important because catfish has become an important traded species with exports to regional markets rising even faster than production, yet limited research has been undertaken to understand the linkages and the non-linearity in the price transmission mechanism. This paper explores the issue using monthly price data from January 2006 to August 2013, and applies threshold autoregressive approaches to test for the existence of a long-run relationship and price asymmetry. The results show that prices in the catfish value chain are tied together by a long-run relationship. It is also revealed that ex-vessel and wholesale price adjustments to retail price changes are symmetric while ex-vessel price adjustments to wholesale price changes are shown to be asymmetric. The direction of causal relationships was observed from the retail to the wholesale and ex-vessel markets, indicating that retailers are the price leaders in the Uganda catfish supply chain.     

Local costs of distribution,international trade costs and micro evidence on the law of one price

This paper connects trade flows to deviations from the law of one price (LOOP) in a structural model of trade and retailing. It accounts for the observed cross-country dispersion in prices of goods, based on retail price survey data, by focusing on two sources of goods market segmentation — (i) international trade costs, and (ii) non-traded input costs of distribution. I find that a multi-sector Ricardian trade model, ala Eaton–Kortum, augmented with a distribution sector, can account for the average price dispersion for a basket of goods fully and generates 70% of the variation in price dispersion across goods within the basket. While tradability of goods is important in explaining the average price dispersion for the basket of goods, distribution costs are important in explaining why, within the basket, some goods show more price dispersion than others.     

An examination of reference prices at factory outlet stores

The purposes of this research study were to (1) examine the use of reference prices by one segment of retailing – factory outlet stores and (2) explore related public policy considerations. The researchers found that there was a significant difference between advertised reference prices at factory outlet stores and the regular retail price found in department or specialty stores in the same market. Advertised reference prices in outlets were significantly higher – a 6.2 percent difference. For only two of the product categories studied were differences not significant – housewares and children's apparel. Since these comparative reference prices are not in line with the regular prices at traditional stores, there is a potential for deceptive price claims.