Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

Exercise 10

One oddity often observed in the market is that stores charge prices ending in 99 (so we see prices of $1.99, $5.99, and so forth). Explain why this sort of pricing might be puzzling to economists. Some have suggested that this is due to stores trying to exploit a cognitive limitation of shoppers. What sort of cognitive limitation might this be? Would you expect market forces to prevent firms from exploiting consumers in this or other ways?