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Call me cynical but I don't at all believe the issue is tax jurisdictions or anything related to complexity. It's that it's easier to show a price of $0.99 and

Call me cynical but I don't at all believe the issue is tax jurisdictions or anything related to complexity. It's that it's easier to show a price of $0.99 and have the consumer pay $1.08 (for example) than either show a price of $1.08 and have the consumer pay it, or show a price of $0.99 and have the consumer pay $0.99 and "lose" 7 cents (because your price was $0.92 before taxes). Pre-tax price is lower and sells better than post-tax price.

jedberg 1y ago
That wouldn't apply if everyone included tax in their prices. In this case, the item would just be $1.10. If the business really thinks they will lose money by pricing over a dollar, then yes, they would have to take that hit. But they are already taking that hit if the "real value" is $1.02 for example. It's just a price/demand curve. They would simply have to optimize it differently.
- rkomorn 1y ago
  There's a reason everything is priced at some variety of .99, 99.99, 999.99, etc: it sells better than 1.08, 108, 1080, etc. My point is getting the consumer to eat the sales tax on top is just a wise trick by US businesses, and nothing to do with complexity.
  - jedberg 1y ago
    That's been debunked. Every consumer just auto-rounds in their head. Companies keep doing it because of tradition more than anything else. It is a wise trick, and exactly the job of government -- to prevent the public from getting tricked by businesses.
    - rkomorn 1y ago
      > That's been debunked. Every consumer just auto-rounds in their head. Has it? I'm searching around and not coming up with much that says that's the case. On the other hand, here are some recent-ish links that suggest it still works: - https://www.rd.com/article/why-prices-end-in-99/ https://www.rd.com/article/why-prices-end-in-99/ - https://capitaloneshopping.com/research/pricing-psychology-statistics/ https://capitaloneshopping.com/research/pricing-psychology-s... This one suggests it depends on the consumer, with "highly numerate" consumers being less likely to think the price is lower (but presumably also less common in the customer pool): - https://business.missouri.edu/about/news/99-ending-prices-are-they-really-effective-we-assume https://business.missouri.edu/about/news/99-ending-prices-ar... Edit: searching for "charm pricing" specifically suggests it does work, but I suppose maybe there's some bias on the context in which people use that term.

jedberg 1y ago

That wouldn't apply if everyone included tax in their prices. In this case, the item would just be $1.10. If the business really thinks they will lose money by pricing over a dollar, then yes, they would have to take that hit. But they are already taking that hit if the "real value" is $1.02 for example. It's just a price/demand curve. They would simply have to optimize it differently.

rkomorn 1y ago
There's a reason everything is priced at some variety of .99, 99.99, 999.99, etc: it sells better than 1.08, 108, 1080, etc. My point is getting the consumer to eat the sales tax on top is just a wise trick by US businesses, and nothing to do with complexity.
- jedberg 1y ago
  That's been debunked. Every consumer just auto-rounds in their head. Companies keep doing it because of tradition more than anything else. It is a wise trick, and exactly the job of government -- to prevent the public from getting tricked by businesses.
  - rkomorn 1y ago
    > That's been debunked. Every consumer just auto-rounds in their head. Has it? I'm searching around and not coming up with much that says that's the case. On the other hand, here are some recent-ish links that suggest it still works: - https://www.rd.com/article/why-prices-end-in-99/ https://www.rd.com/article/why-prices-end-in-99/ - https://capitaloneshopping.com/research/pricing-psychology-statistics/ https://capitaloneshopping.com/research/pricing-psychology-s... This one suggests it depends on the consumer, with "highly numerate" consumers being less likely to think the price is lower (but presumably also less common in the customer pool): - https://business.missouri.edu/about/news/99-ending-prices-are-they-really-effective-we-assume https://business.missouri.edu/about/news/99-ending-prices-ar... Edit: searching for "charm pricing" specifically suggests it does work, but I suppose maybe there's some bias on the context in which people use that term.