Odd‐ending price underestimation: an experimental examination of left‐to‐right processing effects

Abstract

Although findings have been somewhat inconsistent, there is evidence from both experimental studies and field research that prices set just below the nearest round figure produce higher than expected demand at that level. Among the different explanations that have been proposed for these effects are that consumers round prices down, encode prices from left to right, remember only the “most important” digits of a price, and/or attach certain “images” to nine‐ending prices. Utilizing a unique experimental setting, the author examines dollar vs cents digit recall as well as the choice frequencies associated with zero‐ vs nine‐ending prices to determine the efficacy of the proposed explanations. Within this setting, the author concludes that left‐to‐right digit encoding may be a necessary condition for higher than expected demand.