Thursday, July 23, 2009

On the Origins of .99 Pricing

"The Straight Dope" covered the history of 99-cent pricing several years ago. It's not really my specific area of expertise in economics, so I'll defer to Mr Adams:

Dear Cecil:

Why do prices end in .99? My father says it started at Bill's Texaco in Waco, Texas during a price war. I say it's a much older management technique to force employees to open cash register drawers for each transaction (making simply pocketing a bill more obvious). Since we're both inveterate bullshitters we've decided to leave it to you.

Dear Richard:

The topic does lend itself to wielders of the big shovel, no question about it. The most elaborate explanation I've seen is in Scot Morris's Book of Strange Facts & Useless Information (1979):

"In 1876, Melville E. Stone decided that what Chicago needed was a penny newspaper to compete with the nickel papers then on the stands. But there was a problem: with no sales tax, and with most goods priced for convenience at even-dollar figures, there weren't many pennies in general circulation. Stone understood the consumer mind, however, and convinced several Chicago merchants to drop their prices--slightly. Impulse buyers, he explained, would more readily purchase a $3.00 item if it cost "only" $2.99. . . .

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