Editing Psychological pricing (section)

{{Short description|Behavioral economics theory that certain prices have a psychological impact}}
{{Use dmy dates|date=November 2020}}
[[File:Thrifty Gas Prices in San Pedro 2008-06-04.jpg|thumb|150px|Example of psychological pricing at a gas station]]

'''Psychological pricing''' (also '''price ending''' or '''charm pricing''') is a [[pricing strategies|pricing and marketing strategy]] based on the theory that certain prices have a psychological impact. In this pricing method, [[List price|retail prices]] are often expressed as just-below numbers: numbers that are just a little less than a round number, e.g. $19.99 or £2.98.<ref name=":0">{{Cite journal|last=Manning|first=Kenneth|date=2009|title=Price Endings, Left-Digit Effects, and Choice|url=http://www.jstor.org/stable/10.1086/597215|journal=Journal of Consumer Research|volume=36|issue=2|pages=328–335|doi=10.1086/597215|jstor=10.1086/597215|url-access=subscription}}</ref> There is evidence that [[consumer]]s tend to perceive just-below prices (also referred to as "odd prices") as being lower than they are, tending to round to the next lowest monetary unit.<ref>{{Cite journal |last=Strulov-Shlain |first=Avner |date=2023 |title=More than a Penny's Worth: Left-Digit Bias and Firm Pricing |url=http://dx.doi.org/10.1093/restud/rdac082 |journal=The Review of Economic Studies |volume=90 |issue=5 |pages=2612–2645 |doi=10.1093/restud/rdac082 |issn=0034-6527|url-access=subscription }}</ref><ref>{{Cite journal|title = Direct evidence of ending-digit drop-off in price information processing|journal = Psychology and Marketing|date = 2005|pages = 771–783|volume = 22|issue = 10|doi = 10.1002/mar.20084|language = en|first1 = George Y.|last1 = Bizer|first2 = Robert M.|last2 = Schindler|citeseerx = 10.1.1.585.1030}}</ref> Thus, prices such as $1.99 may to some degree be associated with spending $1 rather than $2. The theory that drives this is that pricing practices such as this cause greater demand than if consumers were perfectly rational. Psychological pricing is one cause of [[price point]]s.