It’s been wisdom for decades to charge $9.99 instead of $10 for a product. We’re told people ignore the cents and think of the $9 they see as less than $10—a better deal. A new study, however, has found that people feel pretty strongly for those pennies, too.
It turns out people focus more on the numeric value of economic rewards. If the numeral is bigger—300 cents instead of $3—people act as if it’s worth more. A professor and a graduate student of psychology at Ohio State University conducted the experiment as a variation on the prisoner’s dilemma. The pairs of participants—kept unaware of their partner’s choices—were told that if they both cooperated with each other, they would earn $3 each. If one decided to defect, he or she got $5, while the other cooperating participant got nothing. If both decided to defect, each got just $1.
The new wrinkle in the study, however, was offering half the 24 pairs of participants the equivalent in cents instead of dollars. Students, apparently valuing the 300 cents more than $3, chose to cooperate more often. Even stranger, the percentage of participants who cooperated remained the same whether they were vying for 300 cents or $300.
Just another lesson in the many ways human beings perceive value. Hopefully it doesn’t ruin your plans to start listing prices in pennies.