Working Paper

Convenient prices and price rigidity: cross-sectional evidence

Abstract: This paper provides cross-sectional evidence of convenient prices--prices that simplify and expedite transactions and thereby reduce the time costs from physically making a transaction. I propose that firms may wish to set convenient prices for items that: (1) are typically purchased with cash; (2) are sold alone or with a few similar items; and (3) are high-traffic transactions, i.e., require queuing or are purchased very frequently. I find broad support for the use of convenient prices in locations where making a rapid transaction is important. Convenience also appears to predominantly affect goods and services with above-average price rigidity.

Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Research Working Paper

Publication Date: 2008

Number: RWP 08-04