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.