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#1
03-29-2005, 05:21 AM
 Spectre of Pithecanthropus Charter Member Charter Member Join Date: Aug 1999 Location: Not here. There. Posts: 18,733
Why do gas (petrol) prices always end in nine-tenths?

I don't know if this happens elsewhere, but in my area, Southern California, gasoline prices always end in nine-tenths of a cent per gallon. The price per gallon isnever something like \$2.45, but always \$2.45 9/10.

Why do they do this? When you buy a couple gallons at \$2.45 9/10 per, it's not as if you're going to put \$4.92 on the counter and get 2/10 of a cent back as change.
#2
03-29-2005, 05:51 AM
 CynicalGabe Guest Join Date: Nov 2004 Posts: 5,760
In spite of my link, there are no stupid questions
#3
03-29-2005, 05:56 AM
 CynicalGabe Guest Join Date: Nov 2004 Posts: 5,760
Quote:
 Originally Posted by Spectre of Pithecanthropus When you buy a couple gallons at \$2.45 9/10 per, it's not as if you're going to put \$4.92 on the counter and get 2/10 of a cent back as change.
But if you buy 10 gallons, and yu are an insomniac like me, you would ave calculated that you would pay 24.59, an even number of cents. So to speak,

I just noticed, due to my zombie state of mind, that I did not need the calculator to do that math.
#4
03-29-2005, 06:14 AM
 Sample_the_Dog BANNED Join Date: Apr 2004 Location: Eden Alley Posts: 1,462
It's pure marketing. Because, crazy at it seems, knocking off that one dollar or penny or fraction of a penny actually works.

<hijack>
I lived in Spain for a while, when they were coming out of their Franco-ist isolation and American/European influences were beginning to creep in, especially in tourist areas. (Yes, I know Spain's in Europe, but even Spaniards would talk about Europe as though it were some foreign location.)

I recall going for a hike/picnic in the mountains and stopping at a little cafe that catered to the tourist trade. Their prices ended in .99.

The woman I was with thought that was the stupidest thing she'd ever heard of, and said so, loudly and repeatedly in fine Spanish fashion. 3.99? Who ever heard of 3.99? What am I going to do with one peseta?

She left the peseta (and nothing else) on the bar.
</hijack>
#5
03-29-2005, 06:40 AM
 Faldage Guest Join Date: Dec 2000 Location: Newfield, NY Posts: 169
Quote:
 Originally Posted by CynicalGabe there are no stupid questions
But there sure are some stupid answers.
__________________
Non eandem arborem videt
#6
03-29-2005, 08:50 AM
 Newton meter Guest Join Date: Mar 2002 Location: Århus, Danmark Posts: 469
Quote:
 Originally Posted by Sample_the_Dog It's pure marketing. Because, crazy at it seems, knocking off that one dollar or penny or fraction of a penny actually works.
Does it work for gas at a tenth of a penny?

It doesn't seem to be able to influence a consumer's decision to buy gas at a particular station, because every station does it. That is, when comparing \$1.879 and \$1.889, there is still one penny difference, just as if it had been \$1.88 and \$1.89.

It doesn't seem to be able to influence the decision of the quantity of gas to buy: people buy gas in one of three ways: (1) they fill their tank, (2) they buy a certain dollar amount, or (3) they buy a certain number of gallons.

If (1), then they received a slight discount on the gas bill because of the merchant's decision to knock a tenth of a cent off per gallon.

If (2), then they spent the same amount and drove away with less gas.

If (3), then they again received a small discount on the price of gas for X gallons.

The only marketing effect that's left is some effect on whether to buy gas or not (or whether to drive somewhere or not, spurring the demand for gas). If that's it, then is a penny itself too small to make much of a difference? Unless consumer behavior varies with a penny increase or decrease, it will not vary with an illusory 9/10 of a penny decrease (especially not a permanent one that happened before we were even born).
#7
03-29-2005, 04:26 PM
 groman Guest Join Date: Apr 2004 Location: San Jose, CA Posts: 3,514
The initial reason was marketing. When gas was 10 cents a gallon(making this up, don't know if it was ever this cheap), 9.9 cents looks better than 10 cents.

Now, it's a tradition, but do you want to be the first gas station to change? Nobody ever looks at the 9/10s, so if you start offering gas at 1.49 instead of 1.499 you're losing out a cent a galloon with the same "perceived" price. So even though you're getting .9 cent less per galloon, you are going to seem as expensive as the guy across the street selling gas at 1.499 Unless some gas company makes it a big promotion(expensive, marketing wise) i don't think the 9/10s will ever go away.
#8
03-29-2005, 06:10 PM
If I owned a station, I'd sell gas at \$2.13 8/10 just for a hoot. I think the customers would get the joke and appreciate it. But I'd have to get the 8/10 numbers custom made. Actually, it might be quite expensive, the pumps might not be able to be so calibrated. Does anyone know?
#9
03-29-2005, 08:42 PM
 postcards Guest Join Date: Aug 2001 Location: The other Long Beach. Posts: 3,061
The pumps here in New York are digital, for the majority that I've seen. So you could probably charge \$2.17 37/164.

I'd go to that station.
#10
03-30-2005, 12:27 AM
 Nametag Charter Member Join Date: Apr 2002 Location: California Posts: 8,086
As I posted back in 2002:
Quote:
 According to this site, there is no good reason for the nine-tenths custom. It appears to have started in the 1920s or '30s, and is being banned in some states. The pricing of gasoline with fractions of a cent, combined with uneven rounding off practices, appears to give the seller a slight advantage in dollar terms. However, it mainly appears to be a selling thing, the same as selling a \$100 for \$99.99. Remember, though, that gasoline was very cheap in the '20s, and that 1/10 of a cent was a more significant part of the price of a gallon.
#11
03-30-2005, 12:28 AM
 Nametag Charter Member Join Date: Apr 2002 Location: California Posts: 8,086
#12
03-30-2005, 12:37 AM
 Si Amigo Member Join Date: Nov 2004 Location: North of 8 Mile Posts: 3,941
Quote:
 Originally Posted by Nametag As I posted back in 2002:
Which state is sold by the round number? Sorry but I viewed the thread and it was inconclusive to me at this hour. Thanks
#13
03-30-2005, 05:16 AM
 Colophon Guest Join Date: Sep 2002 Location: Hampshire, England Posts: 13,359
So do other countries use this practice? We certainly do in the UK - back when we used to buy petrol by the gallon it would be £2.299 per gallon (or whatever) and now it's sold in litres it is 82.9p (or whatever) per litre. The signs always say ".9" rather than "9/10", though.

Incidentally, doesn't the "mil" (i.e. 1/10 cent) have legal status in the USA? I'm sure I read that somewhere. However, the fact that 1/10 penny has no legal standing in the UK doesn't seem to stop the petrol companies doing it.

Just a thought... assuming the pump rounds down values of .1 to .4 of a penny and rounds up those from .5 to .9, shouldn't we all be buying petrol only in certain multiples?

1 litre = 82.9p. You pay 83p
2 litres = 165.8p. You pay £1.66
3 litres = 248.7p. You pay £2.49
.
.
6 litres = 497.4. You pay £4.97, saving 0.4 pence! That'll show 'em
#14
03-30-2005, 11:09 AM
 Nametag Charter Member Join Date: Apr 2002 Location: California Posts: 8,086
From the cited site:
Quote:
 An Iowa law, effective June of 1985 (Omaha World-Herald, 1985), mandated whole-cent prices for gasoline sold in that state
#15
03-30-2005, 11:34 AM
 aahala Guest Join Date: Mar 2002 Posts: 1,781
Quote:
 Originally Posted by Colophon Incidentally, doesn't the "mil" (i.e. 1/10 cent) have legal status in the USA? I'm sure I read that somewhere. However, the fact that 1/10 penny has no legal standing in the UK doesn't seem to stop the petrol companies doing it.
I think it was the individual states that used to issue mills, the practice ended in
the late 40s, early 50s. I remember seeing red and blue ones, one was .1 cent and the other was .5 cents.

What we really need in the US is a 99 cent piece.
#16
03-30-2005, 11:46 AM
 Schnitte Guest Join Date: Feb 2001 Location: Frankfurt, Germany Posts: 3,462
There have never been mill coins in the U.S. (at least Cecil says so); it seems to have been a unit for calculating taxes, with the resulting amount getting rounded to the nearest full cent.

The .9 cents prices are very common in Germany as well, and they're always in decimal format (i.e. .9, not 9/10). Regarding why this practice is so widespread, I think groman hit the nail: The first station to change would suffer disadvantages. People have been so accustomed to the nine tenths of a cent you'd need a massive advertising campaign to tell them you're marketing your gasoline at full cent prices; if you drop the custom, you lose 0.9 cents on every gallon/litre sold without getting the advantage of winning customers because they wouldn't realize you're cheaper.
#17
03-30-2005, 12:16 PM
 Bytegeist Guest Join Date: Jul 2003 Location: Maryland, US Posts: 2,377
Quote:
 Originally Posted by Colophon Incidentally, doesn't the ["mille"] (i.e. 1/10 cent) have legal status in the USA? I'm sure I read that somewhere.
Yes, though the U.S. Mint has never issued currency with that fine a resolution. (Some state governments have, as others have just mentioned, but I don't think any do currently.) From the U.S. Coinage Act of 1792:

Quote:
 ... the money of account of the United States shall be expressed in dollars or units, dismes or tenths, cents or hundredths, and milles or thousandths, a disme being the tenth part of a dollar, a cent the hundredth part of a dollar, a mille the thousandth part of a dollar, and that all accounts in the public offices and all proceedings in the courts of the United States shall be kept and had in conformity to this regulation.
The term disme, however, doesn't appear to have caught on like the Founding Fathers had hoped.
#18
03-30-2005, 03:27 PM
 Giles Charter Member Join Date: Apr 2004 Location: Newcastle NSW Posts: 12,847
Quote:
 Originally Posted by Bytegeist The term disme, however, doesn't appear to have caught on like the Founding Fathers had hoped.
Nevertheless, the term "dime" appears on all the US 10-cent coins that I have seen.
#19
05-04-2005, 03:49 PM
 jawdirk Guest Join Date: Mar 2002 Location: Bay Area, CA Posts: 544
It's purely about the psychology of the purchase.

\$2.39 9/10 is the most you can charge (in tenths of cents) without people thinking "There is no way I'm going to pay \$2.40 for a gallon of gas."

When most people look at the number, they see \$2.3--, because they are so accustomed to seeing the nines. There is a psychological difference between \$2.30 0/10 and \$2.29 9/10, and that psychological difference is worth more than 1/10 of a cent. There is also a psychological difference between \$2.30 0/10 and \$2.39 9/10, but it is worth less than 9 9/10 cents.

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