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While they “work” it doesn’t mean people would behave differently if nobody used it ever. People have finite money so over time spending habits end up balancin
by Retric 2y ago
While they “work” it doesn’t mean people would behave differently if nobody used it ever. People have finite money so over time spending habits end up balancing with incomes by necessity and most people end up spending everything they make over time.
So whatever willingness people have to buy something at 19.99 would likely be reached at 20$ if that was the normal price everywhere.
- II2II 2y agoLet's say that you are pricing products and a competitor is charging $19.99. You know that one cent is not going to change the purchasing decision of potential customers. If it did, you would simply price your product at $19.98 (and maybe get into a price war one penny at a time). Yet you also know that the price ending with a nine will have an impact upon sales. It is not rational, but that's what the statistics appear to say. While it won't have any meaningful impact upon how much money people have to spend, it will have an impact upon where people spend their money.
- Retric 2y agoSure it’s a prisoner’s dilemma. If everyone charges 20$ then everyone gets to charge 20$ but as soon as someone uses 19.99 everyone is stuck charging 19.99. It also implies a rather large economic inefficiency where companies don’t charge 13.27$ because people don’t pay enough attention for it to matter.