In the 70’s, when I studied accounting, one of the instructors told for the truth (meaning that I believed him) that in the early days of computers, a programmer for a Wall Street company programmed the computer so instead of dropping the fractions of a cent on each transaction, it deposited it in his account. He apparently had quite a haul until he got caught.
I studied Marketing as part of my degree. Those guys are some of the most knowledgeable around on many aspects of the human species and what makes them tick.
Most people can walk into a strange store and tell at a glance whether it is correct for their correct socio-economic class, just by the decor. Also, newspaper advertising is also designed to make it obvious at a glance if the store is correct for the reader’s socio-economic class. Amazing.
I want to round off my Q-tip purchase to the nearest whole dollar—say, $2 for whatever number. Or, I might go for a quantity which, plus sales tax, equals a round number (though, that calculation gives some people a headache).
I’m talking about sales tax on anything you buy anywhere. Why are we talking about gas stations? Lots more money gets spent at the grocery store, and if this rounding ‘issue’ was real, wouldn’t we look there first? And in your example, it results (if it occurs, do you know?) in an increase in income of 0.008/24.01, or 0.03%. Three one-hundreths of one percent.
I’m thinking that the price would go to $10.00 or maybe $10.90 (If you like the “point 9” stuff). It won’t go down.
Think of why it is what it is now. The retailer wants you to think "It is less than $10.00 If the retailer wants to keep customers thinking his prices are “less than” he is going to make that $9.90 if needed. In the long run it makes no difference.
Wasn’t that dropping the fractions of cents into a bank account part of the premise for the movie Office Space? I like the film better if someone really did that.
This may have been part of hollywood, but it really did happen to a major company I was contracted and consulted for. The algorythum was writted in machine code so it blended in with the rest of the code the computer was running. The algorythum was so small - approximately 10-15 lines of code - that it was never discovered. The code was to - like in Office Space - take the fractions of a cent from literly 100’s of thousands of cash transactions per day, 7 days/week 52 weeks/year for almost 15 years. At the end of a set amount of transactions the balance was deposited into an account, then that account was deposited into another account which was finally deposited into yet another account where the person withdrew the funds and deposited into his own account. Just before he retired he removed the algorythum and retired with benefits and his illgotten booty. The algorythum was never discovered and the company never knew what was going on. As far as I know, he was never exposed.
I came across an antique gas pump. It was a Sky Chief Ethyl Gasoline (Texaco Corporation). This was one of those units that used a hand pump to fill a measured glass tank on top. The vehicle’s tank was filled by letting the tank drain into the vehicle’s via the fill hose. The legend on the pricing was Gasoling 9 3/10; S&F Tax 4 1/2; and total 13 8/10 cents. Below that it had the cost in gallon gradiations starting at 1 — 0.14 cents to 16 – $2.21. So I think the 9/10 became a tradition when the price reached 35 9/10 etc. because it would always look better than 36 during the gas price wars.
Wouldn’t it be a hoot to buy 10 gallons of gas for $1.38.
I'd HATE getting rid of the penny. As --V common sense says, I think with the present weak economy, there's no way in hell ANYONE would round down. $9.99? That'll be $10. $4.76? That'll be $4.80. Those few cents add up over the course of a month... if you've got lots of money it's no big deal, but I see people scraping together change to get a cup of coffee or whatever often enough, I do not want to see them lose their pennies.
As for original post:
I don't know the origins but I agree with the "psychology" theory. Gas here (looks out the window) is $1.84 and 9/10ths. EVERYONE says it's $1.84 rather than calling it $1.85, which is more accurate if you're going to round off. The stations here in town all price fix (20+ stations and all the exact same price) so it really makes no difference but they seem to be used to it... I've never seen a pump without the 9/10ths at any rate.
I think with the present weak economy, there’s no way in hell ANYONE would round down. $9.99? That’ll be $10. $4.76? That’ll be $4.80. Those few cents add up over the course of a month…
My degree is in Economics, I spent quite a few years in retailing. There is no way a retailer is going to give up an opportunity to make their price seem less. I have been though more than one down turn and retailers have never given up on that marketing trick, because it works. The consumer sees $9.95 or $9.99 as the same, but $10.00 is more. Every retailer know the first and only rule is to sell the product. You only loose money on a product that sits on your shelf.