I came across this paper today.
Do Consumers Perceive Precise Prices to Be Lower Than Round Prices? Evidence from Laboratory and Market Data
Manoj Thomas, Daniel H. Simon , and Vrinda Kadiyali
Here is the summary of the findings
In considering price tags, do consumers perceive
round numbers to be larger or smaller than precise numbers of similar
value? The authors examined the prices of 27,000 homes in South Florida
and Long Island, N.Y., and their results showed that homes priced with
a rounded number (for example, US$550,000) sold for about 0.73 percent
less on average than homes with a more precise price (say, $553,505).
Furthermore, the authors found that buyers perceived precise prices to
be lower, and were therefore willing to pay an amount closer to the
asking price than they were when the price was a round number.
People tend to
perceive precise prices as less than round prices of similar value.
This discovery could have significant implications for buyers, sellers,
and pricing strategists in any number of industries.
Marketers have long since believed that £4.99 is better than £5.00. If you take the conclusions of this report, it may be that £5.17 or £5.42 is much better.
Further to that, maybe consumers have been well trained to think that £4.99 is really just £5.00. But what if precise prices like £4.87 or £5.13 are seen as better value?
This research suggests that precise prices are seen as lower than rounded prices. they also seem like they might reflect the real cost of the goods rather than being a rounded up to make more money.