“…the average person treats a price ending in .99 as if it were 15 to 20 cents lower.”
The tendency is called left-digit bias, when the leftmost digit of a number disproportionately influences decision-making. In this case, even though the real difference is only a penny, research shows that, to the average person, $4.99 seems 15 to 20 cents cheaper than $5.00 – which results in selling 3 to 5 percent more units than at a price of $5.00"
Why Literally (Almost) Every Price Ends in 99 Cents
https://en.wikipedia.org/wiki/Psychological_pricing
EDIT: The left-digit bias is not just pennies / cents. It applies when going from $99 to $100…$399 to $400…$999 to $1000 etc.
EDIT 2: If you have a car for sale and you want $10,000 for it are you listing it for $10,000 or $9995?
If at any point left-digit bias stopped working then merchants would increase the price by a penny or a dollar (when going $99 to $100). Walmart is not going to leave money on the table. It still works.
It still works at scale. If I’m selling a couch on craigslist for $10, I’d have to be a massive butthole to advertise it at $9.99. The fuck am I going to do, give them a penny in change? $10 is $10. I only need to sell it once, and I do not have the patience to deal with someone looking to haggle.
I understand. But what if you’re selling a refrigerator or laptop for $400? You could list it for $399 or $395. The left-digit bias is not just pennies / cents. It applies when going from $99 to $100…$399 to $400…$999 to $1000 etc.
Then I want $400. Like I said, I onlyhave to sell it once. I don’t need to sell it to more than one person.
And if I saw someone selling a refrigerator for $399, personally it would make me doubt their trustworthiness.
The left digit bias is real over large groups of people. You’re going to sell more laptops at $399 because of left digit bias, but it doesn’t make a discernable difference when you’re only selling one. And again, then I have to deal with making change. Somebody’s going to hand me four hundred dollar bills, and I’m going to dig into my pocket for a crumpled single? Or maybe three quarters, two dimes, and a nickel?
Not trying to start a debate with you and I know you’re just talking about a $10 item (and I agree with you on that) but your comment about “not looking to haggle” being the reason you’d use a whole number is not in agreement with another psychological trick.
When Negotiating A Price, Never Bid With A Round Number
That’s not a persuasive argument. I’m not interested in haggling. The price is $10. If you see that and think “Oh, I’ll offer $5” then the answer is “no”. We’re sure as shit not going to meet in the middle at $7.50.
Same argument at $400. That’s what I want to get for it, which is why I put that price on it. I don’t want $399 or $250, because life is too short and I’m not that desperate to sell anything. I’d rather give it away for free than haggle with someone over the price. I don’t need to sell it today, and I’m happy to wait for someone who is willing to pay the asking price. I’m not running a pawn shop.