I purchased a new DVD Drive for $20.99. Why didn’t the vendor charge me $21.00? What is the point of charging $20.99? It happens elsewhere too. I bought a large coffee for $4.99, and a hamburger for $1.99. Why not charge me $5.00 and $2.00 even.
Is it tax related? Does the state benefit from the .99 cent charge as opposed to the nearest even dollar charge?
Do vendors want to make me do more math? Is my algebra teacher looking down on me from heaven and laughing at me? What gives?
Ficer67
It ‘seems’ less expensive that way. I can’t see any way in which it would have any relation to taxes.
$4.99 for a cup of coffee?? Wow.
Yep, that’s it. To most people, 20.99 seems like “only 20.00”.
A better example is the 9.99 - “Wow, it’s less than $10.00!”
Because people are stupid and will round down no matter how close the number is to the next digit up. I have a friend that rounds EVERYTHING down on prices. If it’s 4.99, to her it’s 4.00. If it’s 99.99 it’s 99.00. It’s irritating.
I’ve heard also that it’s used in some places to cut down on theft by staff. It’s harder to pocket the cash when the customer expects change.
In Australia the smallest coin in $0.05. Amounts are rounded off to the nearest 5c for cash purchases. It’s more common here to see .95 than .99.
I am glad to know that it is only a sales gimmick. There are a lot of those…
See also Why do all gasoline prices end in 9/10 of a cent?
Even though I *know *that $19.99 is only one cent short of $20, there is a powerful psychological effect occurring that I don’t really understand. But at least with me, I don’t think of this is as being the same as $20 unless I explicitly say to myself (or to someone else), “That’s $20.” To say that “people are stupid” is oversimplifying the situation. IANAP but this is more complicated than a mere matter of intelligence. Marketers have always done this and done it successfully, but the vast majority of people do not lack the intelligence to count pennies.
This same approach is taken for items costing less than a dollar to homes costing millions.
Is tax already calculated into that price? In the US, tax is added at the cash register, so in Virginia if the sticker price is $5 I pay $5.25 at the register. So here, that pricing wouldn’t affect whether change is required.
In Australia, the GST (a value-added tax) is included in the sticker price, so something priced at $4.95 is really $4.50 + 45c GST.
Whilst technically true, I think we can agree that most people would say the item costs $4.95 and not worry too much about how much of that is GST…
Yes, if you’re the end-user. On the other hand, if you’re using it as an input to providing another good or service, then you can credit the GST paid against the GST received when selling the other good or service.
Straight Dope column:
Why do prices end in .99? (February 21, 1992)
According to the column: the why is to make people think they are getting a good deal.
The when is that this became common in the USA in the 1920s.
The who (came up with this idea) is impossible to answer.
From when I come this type of prices are called Czech prices, but I am not sure why. Probably they started used it before their neighbours did.
Another reason to point out is almost guaranteed tip. Tips are quite uncommon here in Central Europe in almost any form. But rounding up for few cents isn’t.
I don’t doubt the OP’s numbers; it’s just a funny world where a cup of coffee can cost twice as much as a hamburger.
According to Uncle John’s Bathroom Reader (Sorry I don’t know which edition) the “less than whole number pricing” came into being as a way to ensure items were rung through tills, and also as a sales gimmick. The practice dates back to the earliest days of tills, and is also the reason old timers will remember till drawers that had a bell to signal they were being opened ( so the shop owner could hear if the till was being used). Hence the term “rung” through, ringing up a sale, etc. Ka-Ching!
I can remember stuff priced that way before sales taxes. I like Dollar General, they price stuff $1.00, $2.00, $3.00, etc.
They way I heard it, .99 pricing is the brainchild of one James Cash Penney. You might have heard of his stores.
If the 99 is such a wonderful come hither tool why does WallMart use so many 97s and 87s and 77s? I vaguely reading somewhere that someone had studied these things and 99 was not the best but that was long ago and in another country and …
I remember visiting a particular Native American-owned gas station in the Buffalo, New York, area in the late '90s. The gas price was 92.4 cents/gallon, which I think is the only time I’ve seen it end in anything other than 0.9 of a cent.
Thus keeping your accountant employed in the process. 
I do see gas at xx.4 cents/litre once in a while. (I’m in Canada.)