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| Author: | Stiving, M. |
| Title: | Price-endings when prices signal quality |
| Journal: | Management Science
2000 : DEC, VOL. 46:12, p. 1617-1629 |
| Index terms: | PRICES QUALITY SIGNALING |
| Language: | eng |
| Abstract: | This paper provides a theoretical explanation for why firms behave as though they use round price to signal quality. By replacing the linear demand curve in Bagwell and Riordan's (1991) price as a signal of quality model with a kinked demand curve, and analyzing what price endings firms are most likely to use, the following observations can be made: 1) Firms, that are using high prices to signal quality are more likely to set those prices at round numbers, and 2) price-endings themselves are not necessarily signals of quality. |
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