Manipulating Prices Using Digit Psychology
A previous week's Math News focused on how people don't equate $1 with 100 cents. Related research on numerical effects has been done by others, especially as it impacts buying habits.
Ken Manning (CSU) and David Sprott (WSU) have shown that "shoppers pay a disproportionate amount of attention to the leftmost digits in prices and these leftmost digits impact whether a product's price is perceived to be relatively affordable or expensive." For example, given two pens priced at $2.00 and $3.99, 44% participants chose the higher-priced pen, but when the same pens were priced at $1.99 and $4.00, only 18% participants chose the higher-priced pen. Also, the researchers showed that consumers regard the prices of $30.00 and $40.00 to be more similar than the prices of $29.99 and 39.99.
In contrast, Keith Coulter (Clark Univ.) and Robin Coulter (Univ. of Conn.) focused their research on the right-most digits. They showed that when the right-most digit is small, people regarded the discount to be larger than when the right-most digit was large. For example, an item discounted from $222 to $211 is felt to be a better deal than an item discounted from $199 to $188, even though both involve an $11 discount (and the first was smaller percentage). Also, they showed that when consumers see juxtaposed regular and sale prices with identical left-hand digits, they feel it is a bigger discount if the right-most digits are small (i.e. less than 5).
The end result...when buying products, numerical sense goes out the window... PLUS, maybe this same effect is in play when students view their test scores, etc.
Source: ScienceDaily, Feb. 24, 2009 and Sept. 1, 2007