In classical economic theory, consumers make rational choices based on price comparisons and other objective factors. So any shopper who’s looking at a $49.99 cell phone knows he’s in effect paying $50, right?
Wrong, say business researchers who have studied this issue. Not only do people make all kinds of purchasing decisions that aren’t rational, they say, but they’re particularly susceptible to the kind of offers cited above, which are known in the trade as “9-ending” or “just below” prices.
Studies show the technique not only influences people’s perceptions of prices, but boosts their buying.
Source: Mark Roth