Price developments after a nominal shock: Benford's Law and psychological pricing after the euro introduction.

Author(s)

Tarek El-Sehity, Erik Hölzl, Erich Kirchler

Abstract

Retail managers use psychological pricing to make the prices of goods appear to be just below a round number. The euro introduction in 2002, with its various exchange rates, distorted existing nominal price patterns while at the same time retaining real prices. We studied consumer prices before and after the introduction of the euro by using Benford's Law as a benchmark for price adjustments. Results indicate the usefulness of this benchmark for detecting irregularities in prices, and a clear trend towards psychological pricing after the nominal shock of the euro introduction. In addition, the tendency towards psychological prices results in different inflation rates in dependence of the price pattern. 2005 Elsevier B.V. All rights reserved.

Organisation(s)

Journal

International Journal of Research in Marketing

Volume

22

Pages

471-480

No. of pages

9

ISSN

0167-8116

Publication date

2005

Peer reviewed

Yes

Austrian Fields of Science 2012

502010 Public finance, 504003 Poverty and social exclusion, 501011 Cognitive psychology, 501021 Social psychology

Sustainable Development Goals

SDG 10 - Reduced Inequalities

Portal url

https://ucrisportal.univie.ac.at/en/publications/bdffb305-2351-4808-baf8-702504483fdc