It Makes Cents

Bouree Lam revisits a topic the Dish discussed at some length after we set the minimum price for a Dish subscription:

The “undercover” economist Tim Harford (he has a book and writes column at the Financial Times by that title) has explained the theories for why 6988194807_8e9b34ba2a_bprices in our world end in “9.” First is something called the left-digit effect, which suggests that consumers just can’t be bothered to read to the end of prices. The mind puts the most emphasis on the number on the far-left, so even though $59.99 is closer to $60, it’s the “5” that registers. The other theory is that prices ending in “.99” signal a deal to consumers. In short, consumers seem to like prices that end in “9,” and experiments say that pricing things this way increases purchases.

Despite the ubiquitous “9” pricing practice, most numbers used in everyday life are whole numbers. It’s not common to say, “just give me 5.27 minutes.” But why do [restaurant] Le Pain Quotidien’s prices still make my mind reel? A new study in the Journal of Consumer Research might have the answer. Researchers found that shoppers deal with pricing information differently when prices feature round numbers (“5”), as opposed to non-round ones (“4.99”). When something costs $100, consumers tend to rely on their feelings, whereas when something has an irregular price—such as $98.67—consumers have to use reason to compute whether it’s a good price.

(Photo by Matt Fox)