The psychologists decided to check these lab findings in the real world. They looked at five years of real estate sales in Alachua County, Florida, comparing list prices and actual sale prices of homes. They found that sellers who listed their homes more precisely—say $494,500 as opposed to $500,000—consistently got closer to their asking price. Put another way, buyers were less likely to negotiate the price down as far when they encountered a precise asking price. Furthermore, houses listed in round numbers lost more value if they sat on the market for a couple of months. So, bottom line: one way to deal with a buyer’s market may be to pick an exact list price to begin with.
This isn’t all about money, however. Medical information, Janiszewski and Uy note, can also be offered in either precise or general terms: a physician might say that your chance of responding to a medication is “good” or that your chance of responding is 80 percent. The percentage is more precise, but many studies have shown that patients prefer vague generalities like “good,” so doctors tend to use them. But remember that life is an auction. In his mind, the patient is dickering with the doctor, so why not negotiate “good” up to “excellent”? When treatment choices are on the line, the auction house can indeed be a perilous place.
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17 Comments
Add CommentAnd there was me thinking it was all to do with giving change...
Reply | Report Abuse | Link to thisBack in olden times, when five cents was actually worth five cents (or marks or pence or drachmas, insert the currency of your choice here...), shop-keepers would price their items to deliberately avoid round numbers - 19.95 instead of 20.00. This was to ensure that their staff had to open the till (and thus record the transaction) to give change, and not pocket the money.
So - old time wisdom 1, psychological babble 0
Historically, merchants put the nines in once cash registers had been invented. They wanted their employees to enter the amounts in the machine, rather than doing totals in their heads. R
Reply | Report Abuse | Link to thisSo, Why are things marked as $19.95 in the US, but as £19.99 in the UK? Does that 4 cents/pence really make a difference? In which case are my UK shopkeepers making 4p on every purchase?
Reply | Report Abuse | Link to thisI disagree. To me, precise numbers signal that that seller (presenter, politician etc) has done the research, worked out his optimal values and will be hard to bargain with. Round numbers are a sign of sloppy thinking that can be taken advantage of.
Reply | Report Abuse | Link to thisI've heard two alternative explanations for the $19.95 phenomenon. One is that sales taxes were based on whole dollar amounts (for ease of calculating percentiles), so the merchants were getting most of that extra dollar ; the other is that $9.95 looks smaller (fewer digits) than $10.00, and because we read from left to right, we see $19.95 as less than $20.00.
Reply | Report Abuse | Link to thisI've also read that we've become so ingrained to see 9s as indicating a mark-down in price that sales of a product actually increased when the price was changed from 96c to 99c.
I can't explain the 95c vs. 99p dichotomy, but in Australia, 1c and 2c pieces were abolished and 5c is the smallest coin available - yet many book distributors here have just increased prices from (for example) $32.95 to $32.99. This is rounded up by cash registers to $33, saving the need to give change, but it still has the psychological impact of the 9s. (In Australia and the UK, sales taxes are already factored into retail prices.)
"(In Australia and the UK, sales taxes are already factored into retail prices.)"
Reply | Report Abuse | Link to thisAs they SHOULD be everywhere...
The one that really blows me away are fuel prices at say 3.599 -- my thought is always --- looks like $3.60 to me.
Reply | Report Abuse | Link to thisshop keepers used to set odd prices like 19.95 so that the cashier had to open the drawer to give change--instead of pocketing the money.
Reply | Report Abuse | Link to thisYep, Bunnylove. Spot on.
Reply | Report Abuse | Link to thisThat practice was begun by that great foreign entrepreneur Jacques Claude Penney'.
I am told when I was in USA that 99.99 is a smaller number than say 100. 99.99 registers in mind like a 2 digit nubmer and 100 like a 3 digit. So it is a Marketing trick to make the buyer make faster decistion thinking that the price is affordable even when there is only a cent difference between the two. Less coginative dissonecne for the buyer when it is priced at 99.99 or 99.94 than 100. Any way when paying with a cheque one might write 100.
Reply | Report Abuse | Link to thisJust a note to joerocker, I disagree that taxes should be included in the price, I think it's important for people to know exactly how much money their government is taking from them.
Reply | Report Abuse | Link to thisI thought it was so when the sales taxes is added on it will come out to close to a whole number
Reply | Report Abuse | Link to thisI thought it was so you think it is cheaper.Then you are more likely to buy the product. This is a very interesting.I would like to know more about this study.
Reply | Report Abuse | Link to thisAfter taxes it's over 20. if it's 19.95 so just round up....if u are smart enough to do that.
Reply | Report Abuse | Link to thisThe truth is that pricing at 19.99 rather than 20.00 began as a result of sales tax. The sales tax system was charging .02 cents tax increments at round price intervals. By charging customers 19.99 therefore they would cost them selves .01 but save their customers .01+.02
Reply | Report Abuse | Link to thisI wish we start thinking about patients well being, progress of disease, patients improvement, complaince about treatment and physician competence in mathematical terms. That is really urgently needed in present days.
Reply | Report Abuse | Link to thisSam K
I also note that the same theory works with speed limits. For example: a speed limit of 15 mph is routinely ingnored, however if the speed limit is posted as 13 mph drivers will more closely monitor their speed.
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