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Title page for ETD etd-05212018-171304

Type of Document Dissertation
Author Yuen, Jonah Jung Hao
URN etd-05212018-171304
Title The 99¢ Dissertation: Essays on Psychological Pricing and Search
Degree PhD
Department Economics
Advisory Committee
Advisor Name Title
Benjamin Eden Committee Chair
Hyunseung Oh Committee Member
Kathryn Anderson Committee Member
Paige Skiba Committee Member
Robert Driskill Committee Member
  • price dispersion
Date of Defense 2018-05-08
Availability unrestricted
Prices play a critical role in economics by guiding the efficient allocation of resources in market-based economies. In this dissertation I address two puzzles regarding prices: why so many prices end in 99 cents, which is a type of psychological pricing, and why the same product may have different prices in the same location, a phenomenon known as price dispersion. First, I test whether a model of inattentive consumers can explain why many, but not all, prices end in 99 cents. Data suggest the model can explain some of the variation in 99-cent price endings at the microeconomic level but generally fails at the macroeconomic level. I then address the puzzle of price dispersion by testing the empirical validity of the assumption that lower prices motivate search. I find that consumers who undertake additional shopping trips do not save much relative to average prices, which is at odds with many models of price dispersion. I also present jointly-written work proposing a model incorporating search and storage to explain observed behavior after splitting product-store pairs into high and low-priced bins. We show that price and quantity variation over time is lower for high-priced bins and also characterize the responsiveness of high-price bin quantity to lower-price bin price and quantity. In a broader context, these results guide how to refine models attempting to explain the existence of psychological pricing and price dispersion given the empirical deficiencies of existing theories.
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