The “Left Digit Effect”
I’m sure you’ve noticed the odd phenomenon of every price ending in “.99” instead of “.00.”
It’s a combination of two things. One, “charm pricing,” where discounting an item literally by a penny gives the impression of savings. But on top of that is the “Left-Digit Effect.” If you’re looking at an item priced at $4.99 vs. $5.00, the left-most digit is obviously the one you’re paying attention to. What gets interesting about the left-digit effect is that we don’t tend to see notice the last two digits.
For example, if you see something priced $5.49 vs. $5.50, it doesn’t register as much of a difference in savings. But, in $4.99 vs $5.00, the left-most digit being one whole value lower seems like a bigger deal. In both scenarios, there’s only a difference of a single cent, but our brains tend to see that first number and immediately respond, which is why discounts are often designed to bring the left-most digit down a whole number.