At Peer Reviewed By My Neurons a pointer to a fascinating little article in Journal of Consumer Psychology about the psychology of pricing.

[T]he study found that when a price includes a comma (e.g. $1,426 rather than $1426), people are more likely to pronounce it “fourteen-hundred and twenty-six” than “fourteen-twenty-six.” Because there are more words, more auditory processing time is needed, and the increased processing time creates the perception that the magnitude of the price is greater. The same effect occurred when cents were added to a price (e.g. $1426.85 was perceived to be of a significantly higher magnitude than $1,426).

What changes is the encoding of price in the viewer’s memory. From the original article:

In this paper, we demonstrate that including commas (e.g., $1599 vs. $1599) and cents (e.g., $1599.85 vs. $1599) in a price’s Arabic written form (i.e., how it is perceived visually) can change how the price is encoded and represented verbally in a consumer’s memory. In turn, the verbal encoding of a written price can influence assessments of the numerical magnitude of the price. These effects occur because consumers non-consciously perceive that there is a positive relationship between syllabic length and numerical magnitude.

Just as the field of design—broadly writ—means building things to interact smoothly with our perceptions, especially the unconscious; as an outsider I guess I’d call this sort of study merchandising, the design of the consumer experience with the products. As I write this, it all sounds terribly obvious. But I suppose just as design (or good writing for that matter) comprises dozens or hundreds of technical rules, merchandising is partly built from an arsenal of technical principles—hidden from but operating on the consumer.

Merchandising and the fine art of pricing remind me of the equally slippery field of compliance techniques. I enjoyed Cialdini’s slim volume on persuasion and compliance and I learned a lot I about how salespeople get us to do their bidding. (The book is shamelessly promoted at Wikipedia. I’ll omit a more direct pointer here.) As a result, I now routinely refuse free samples (see Reciprocity). After reading about the reflexive, uncontrollable power of the reciprocity drive, I also believe Congress cannot be trusted not to promote their donors’ interests above those of the electorate.

Predictably Irrational, by Dan Ariely, is by far my favorite source on promotion and irrational behavior. After all, isn’t irrationality the soul of PR, merchandising, compliance gaining, and sales? The whole point of these methods is to spoof the expected-value model of the rational consumer from classical economics. Ariely’s book is worth ten Freakonomics and Persuasion volumes put together.

Coulter, K., Choi, P., & Monroe, K. (2011). Comma N’ cents in pricing: The effects of auditory representation encoding on price magnitude perceptions Journal of Consumer Psychology DOI: 10.1016/j.jcps.2011.11.005