Study explains how consumers react to prices ending in 99

Jun 06, 2005

Have you ever wondered why prices do not often end in simple round numbers? Decades of research have focused on the issue of pricing and a new study published in the June 2005 issue of the Journal of Consumer Research analyzes how consumers perceive the difference between prices ending in .00 or .99. This study which focuses on the left digit, rather than cents, finds that the difference can be important to consumers.

"We show that nine ending prices may sometimes but not always be perceived to be lower than a price one cent higher. This perception is more likely to occur when introducing a nine ending in the price causes a change in the left-most digit. Further, this perception is more likely when the nine ending price is perceived to be close to the comparison standard price," conclude Manoj Thomas and Vicki Morwitz (New York University).

Their study focuses on the left digit effect. This effect refers to the change in price that occurs when reduced by one cent from, for example, $3.00 to $2.99--the far left digit changes from three to two. Traditionally, explain the researchers, it was assumed that the nominal difference was inconsequential. However, this study reveals that the minor difference has the potential to have major effects.

"This research adds further evidence to the view echoed by previous researchers that the decision whether or not to use nine ending prices is an important one and deserves due attention," they explain. "Importantly, we show that nine ending prices may sometimes but not always be perceived to be lower than a price one cent higher. This perception is more likely to occur when introducing a nine ending in the price causes a change in the left-most digit. Further, this perception is more likely when the nine ending price is perceived to be close to the comparison standard price."

Source: University of Chicago Press Journals

Explore further: Best of Last Week – Superabsorption theoretically demonstrated, sailing stones mystery solved and origin of anger face

add to favorites email to friend print save as pdf

Related Stories

Cool roofs in China can save energy and reduce emissions

Aug 28, 2014

(Phys.org) —Working with Chinese researchers, the Department of Energy's Lawrence Berkeley National Laboratory (Berkeley Lab) has conducted the first comprehensive study of cool roofs in China and concluded ...

Recommended for you

Has microfinance lost its moral compass?

1 hour ago

The industry that provides financial services for people on low-incomes and without access to traditional banking services is morally reprehensible according to new research from The University of Manchester.

One of world's earliest Christian charms found

2 hours ago

(Phys.org) —A 1,500 year-old papyrus fragment found in The University of Manchester's John Rylands Library has been identified as one the world's earliest surviving Christian charms.

Study claims cave art made by Neanderthals

17 hours ago

A series of lines scratched into rock in a cave near the southwestern tip of Europe could be proof that Neanderthals were more intelligent and creative than previously thought.

User comments : 0