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: Archaeologists document highest altitude ice age human occupation in Peruvian Andes

add to favorites email to friend print save as pdf

Related Stories

'Silicon Beach' brings tech boom to Los Angeles

Oct 22, 2014

So long Silicon Valley. These days entrepreneurs and engineers are flocking to a place better known for surfing waves than the Web. Amid the palm trees and purple sunsets of the Southern California coastline, ...

Activist investor pushes Yahoo to buy rival AOL

Sep 26, 2014

(AP)—Yahoo CEO Marissa Mayer is getting some unsolicited advice on how to turn around the long-struggling Internet company, just like some of her predecessors who tangled with investors dissatisfied with ...

Recommended for you

Cloning whistle-blower: little change in S. Korea

3 hours ago

The whistle-blower who exposed breakthrough cloning research as a devastating fake says South Korea is still dominated by the values that allowed science fraudster Hwang Woo-suk to become an almost untouchable ...

World population likely to peak by 2070

20 hours ago

World population will likely peak at around 9.4 billion around 2070 and then decline to around 9 billion by 2100, according to new population projections from IIASA researchers, published in a new book, World Population and ...

User comments : 0