End of 9-endings, price recall, and price perceptions

- A regulatory ban on non 0-ending prices is studied.
- One-year after the ban, 90-ending prices have replaced 9-ending prices.
- After the ban, 90-endings play a role similar to that of 9-endings before the ban.
- 90-endings have replaced 9-endings as the new psychological price point.
- Market's response has partially eliminated the regulation's intended effect.

Prices that end with 9, also known as psychological price points, are common, comprising about 70% of the retail prices. They are also more rigid than other prices. We take advantage of a natural experiment to document an emergence of a new price ending that has the same effects as 9-endings. In January 2014, the Israeli government passed a new regulation prohibiting the use of non 0-ending prices, bringing an end to 9-ending prices. We find that seven months after 9-ending prices have disappeared, 90-ending prices acquired the same status as 9-ending prices had before the new regulation was adopted. Thus, 90-ending prices became the new psychological price points, partially eliminating the regulation's intended effect.