Memory and Markets, or Why Are You Paying $2.99 for a Widget?

Brenner, Gabrielle A.; Brenner, Reuven

doi:10.1086/296157

Cited by 96 publications

(70 citation statements)

References 9 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Perhaps the psychological process that is most often mentioned to account for 9-ending effects, however, is the drop-off mechanism (Basu, 1997;Brenner & Brenner, 1982;Stiving & Winer, 1997). This is the possibility that consumers ignore, or give very little attention to, the ending digits of a price.…”

Section: Proposed Mechanisms Of 9-ending Effectsmentioning

confidence: 99%

Direct evidence of ending-digit drop-off in price information processing

2005

View full text Add to dashboard Cite

Research has suggested that pricing products at one cent below a whole number (e.g., $4.99 instead of $5.00) can be an effective method for increasing purchases. Although many reasons for this have been suggested, a commonly proposed explanation is that consumers tend to drop off, or pay less attention to, the rightmost two digits. This drop-off mechanism has garnered much indirect support, but only limited research has been conducted to directly test it. In this study, respondents provided estimates of how many products they could purchase for $73. Analyses indicated that respondents thought they could buy significantly more products priced with 99 endings than products with comparable 00-ending prices. Follow-up analyses showed that (a) errors made by respondents showed a pattern consistent with a dropoff mechanism, and (b) motivation to carefully provide quantity estimates moderated the effect. The study therefore provides rare direct evidence that the drop-off mechanism may contribute to the effectiveness of 9-ending pricing.

show abstract

Section: Proposed Mechanisms Of 9-ending Effectsmentioning

confidence: 99%

Direct evidence of ending-digit drop-off in price information processing

2005

View full text Add to dashboard Cite

show abstract

“…(Carslaw, 1988, p. 321)). Both phenomena are induced by the fact that humans have only a limited amount of memory available and a limited capacity for storing directly accessible information (Brenner & Brenner, 1982). Therefore, humans only store the most important bits of information (i.e.…”

Section: Introductionmentioning

confidence: 99%

Earnings Management Induced by Cognitive Reference Points

Caneghem

2002

The British Accounting Review

View full text Add to dashboard Cite

Previous studies (Carslaw, 1988;Thomas, 1989;Niskanen & Keloharju, 2000) have shown that companies' managers tend to round-up the ®rst digits of reported earnings (i.e. for companies reporting pro®ts). According to Carslaw (1988), this type of behaviour is inspired by the existence of the so-called`$1Á99' phenomenon where a price of $1Á99 is perceived as being abnormally lower than one of $2Á00. In the current study, we try to determine whether managers of UK-listed companies also engage in this type of`earnings rounding-up behaviour'. Analogous to the earlier studies, our study compares observed and expected frequencies for the second-from-the-left digit in reported earnings. Our results suggest that managers of UK-listed companies tend to round-up reported pre-tax income, in a way that increases the ®rst digit by one, when they are faced with a nine in the second-from-the-left position for this particular earnings measure. The major contribution of the current study is that it introduces discretionary accruals in this line of research. Discretionary accruals were estimated using both the Jones model (1991) and the modi®ed Jones model as proposed by Dechow et al. (1995). Our results clearly suggest that discretionary accruals are used in order to round-up reported earnings ®gures. Moreover, discretionary accruals enabled us to increase the power of the tests used in previous studies.

show abstract

“…Ihmisen käyttömuistin rajoittuneisuus johtaa siihen, että vain merkityksellisimmät numerot voidaan muistaa hyvin (Brenner & Brenner 1982). Esimerkiksi mainonnassa tuote saatetaan hinnoitella 1,99 euron hintaiseksi, koska kuluttajat mieltävät sen huomattavasti alhaisemmaksi kuin 2,00 euroa.…”

Section: Selityksiä Kosmeettiselle Tuloksenohjaukselleunclassified

Näkökulmia tilintarkastukseen ja arviointiin

Leponiemi¹,

Ruohonen²,

Wacker³

et al. 2017

View full text Add to dashboard Cite

Memory and Markets, or Why Are You Paying $2.99 for a Widget?

Cited by 96 publications

References 9 publications

Direct evidence of ending-digit drop-off in price information processing

Direct evidence of ending-digit drop-off in price information processing

Earnings Management Induced by Cognitive Reference Points

Näkökulmia tilintarkastukseen ja arviointiin

Contact Info

Product

Resources

About