A comment on price-endings when prices signal quality

• 成果类型: Editorial Material
• 署名作者: Shoemaker, R; Mitra, D; Chen, YX; Essegaier, S
• 署名单位: New York University; State University System of Florida; University of Florida; University of Pennsylvania
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.49.12.1753.25118
• 发表日期: 2003
• 页码: 1753-1758
• 关键词: Pricing; price-ending; signaling; game theory

摘要

Stiving (2000) proposes an interesting model to explain price-endings. His analysis shows that even when customer demand increases at 9-ending price points, certain firms that use high prices to signal quality are more likely to set those prices at round numbers. This comment raises two issues about the model. First, it appears that the original paper imposes a condition that has the effect of eliminating a broad range of legitimate separating equilibria from the analyses. Second, it appears that the original model does not include constraints to ensure that the demand for each market segment will be nonnegative. When these constraints on demand are included, one obtains different aggregate demand curves, which leads to different equilibrium prices. Using the revised model and analysis, we find that 71% of the prices end in 9 and only 12% in 0. This contrasts with only 3% ending in 9 and 58% ending in 0 for the original study. Therefore, 9-endings still prevail even though high prices can be used by firms to signal high quality.