Convenient prices and price rigidity: cross-sectional evidence
Abstract: This paper provides cross-sectional evidence of convenient prices--prices that simplify and expedite transactions and thereby reduce the time costs from physically making a transaction. I propose that firms may wish to set convenient prices for items that: (1) are typically purchased with cash; (2) are sold alone or with a few similar items; and (3) are high-traffic transactions, i.e., require queuing or are purchased very frequently. I find broad support for the use of convenient prices in locations where making a rapid transaction is important. Convenience also appears to predominantly affect goods and services with above-average price rigidity.
File(s): File format is application/pdf https://www.kansascityfed.org/documents/5330/pdf-rwp08-04.pdf
Provider: Federal Reserve Bank of Kansas City
Part of Series: Research Working Paper
Publication Date: 2008
Number: RWP 08-04