Back to The Undercover Economist homepageMaybe consumers are stupid and think 99p is a lot less than £1. That’s possible, especially if they’re French:
…according to a French study the phenomenon still swings a considerable number of shoppers. Researchers found that lowering the price of a pizza from 8.00 euros to 7.99 euros boosted sales by 15%.
An explanation more consistent with the assumption of hyper-rational consumers is that it’s an technique to deter theft by employees:
…cashiers had to open the till for change, reducing the chances of them pocketing the bill.
But perhaps not, according to Robert Schindler, a marketing professor:
”I studied adverts in the New York Times from 1850 - where there were no 99 endings - to the 1870s and 1880s where they started to appear. Although department stores were doing it - which would fit with the cash register hypothesis - they were advertising discounts. But for the regular price they would use a round number,” he says.
The source is here.
Tim writes about the economics of everyday life. His 
