Dear Economist
I notice that your book, The Undercover Economist, has a list price of £17.99. In it you emphasise that rationality and calculation underlie economic behaviour. If so, why do so many prices end in .99? Do consumers really think that £17.99 is only £17?
Daniella Acker, via e-mail
Dear Daniella,
A more likely explanation – from Steven Landsburg, an economist at the University of Rochester – is that these prices are designed not to exploit incompetence but to fight dishonesty.
A typical bookshop will experience a certain amount of shoplifting, especially of products as tempting as my book. Nobody is better placed to benefit from shoplifting than the shop assistants.
If books – or any products – were roundly priced at œ10, œ15 or œ20, then customers would frequently offer the correct change. In such cases it would be simple for the shop assistant to bag the item without ringing it through the till, and to pocket the cash.
The book would appear to have been stolen by the customer, but this is a far more attractive proposition than trying to fence a stolen copy of A la recherche du temps perdu, or even The Undercover Economist, and the risk is probably lower. All rational shoplifters should get jobs in shops.
However, the more awkward the pricing, the more unlikely those thieving till-jockeys are to be able to pull off the trick…
Continued on ft.com