What is the reasoning behind having retail prices of consumer goods
end with "$0.99". Example: why assign a price of $9.99 to an item, and
not $10.- ?

Hi! Thanks for the question.

It seems that no one is in agreement as to the real reason why
products are priced this way. The following sources have wide varied
opinions.


?Fractional prices suggest to consumers that goods are marked at the
lowest possible price.?

?However, some suggest that intentionally awkward pricing was adopted
primarily to control employee theft, before the turn of the 20th
century when stores expanded beyond owner-operators and used cash
registers. For cash transactions with an odd price, most customers
must be given change. Creating change requires the employee to open
the cash register, recording the sale. This reduces the risk of the
cashier stealing from the store owner.?

?Psychological pricing?
http://en.wikipedia.org/wiki/Psychological_price


?In 1876, Melville E. Stone decided that what Chicago needed was a
penny newspaper to compete with the nickel papers then on the stands.
But there was a problem: with no sales tax, and with most goods priced
for convenience at even-dollar figures, there weren't many pennies in
general circulation. Stone understood the consumer mind, however, and
convinced several Chicago merchants to drop their prices--slightly.
Impulse buyers, he explained, would more readily purchase a $3.00 item
if it cost "only" $2.99. Shopkeepers who tried the plan found that it
worked, but soon they faced their own penny shortage.?

?Why do prices end in .99??
http://www.straightdope.com/classics/a3_166.html 


Our next analysis is from a paper saying that in psychology, this is
known as the ?9 Fixation?. The following are reasons why they seem to
be effective:

- Rounding number illusions
- Consumers love receiving change for their purchases
- ?99? is an attractive digit.
- Retail stores are seen as having a cost cutting scheme whenever they
price their prices this way.

?Why 99 Cents??
http://econ.haifa.ac.il/~ozshy/21why99.pdf


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why prices end in 99 cents

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Easterangel-ga                              
Google Answers Researcher

Example : A price of $9.99 to an item, so they can say their price not
more than $10(others sell at this price usually),so the customer like
to buy the cheaper one. :)

The reason for the cents, whether .95, .99 or something else, is to
force the sales clerk to enter the whole price.  Otherwise, he/she
might just enter 10 for a $10 item, which the register would pick up
as .10 (ten cents).  You can see that it would not take too many of
this kind of error to cost a store lots of lost revenues.   By pricing
something at 7.95 or 8.99, the clerk will have to enter the whole
price, dollars and cents.

Some stores also put different cents for certain items or certain
mark-ups, such a .55 for department 5, or .77 for items on sale, etc. 
That way, if the item is returned, the manager can see if the price
was wrong, or the goods were sold at discount.  You can see the
possibilities.

When we were selling items using paper sales tickets, we priced goods
in dollars, which made them easy to add.  When we grew and went to the
cash registers, we quickly went to dollars and cents.  The cents
amounts were determined to the 'department' and other clues for
management use.