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Do customers still fall for pricing tricks?

April 28, 2008

Inside Retailing: Some recent research conducted by Janiszewski and Uy has focused attention again on the notion of psychological pricing. Are we really fooled when storekeepers price something at $9.95 instead of a round $10? People appear to create mental measuring sticks that run in increments away from any opening bid, and the size of the increments depends on the opening bid. That is, if we see a $20 toaster, we might wonder whether it is worth $19 or $18 or $21; we are thinking in round numbers. But if the starting point is $19.95, the mental measuring stick would look different. We might still think it is wrongly priced, but in our minds we are thinking about nickels and dimes instead of dollars, so a fair comeback might be $19.75 or $19.50.

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