Effects of price endings on demand and pricing

Empirical product prices often show certain price endings, i.e., values after the digit, more often than others. The question arises whether price endings non-linearly affect the purchase decisions of consumers and whether firms consider these reactions in pricing. This study is the first that provides a holistic market perspective of consumer demand and firms’ pricing to answer this question. At an example of real-world sales of a fast moving consumer good, the study introduces an approach that considers heterogeneity of consumers’ reactions in particular towards price and at the same time explores in the full range of possible price endings potential non-linearities of the effect. This approach allows us, for example, to differentiate between consumer segments that are differently responsive to price endings.