solution

Everyday, we see countless “charm” prices (prices that end in the number nine). There might not be any consensus on how this came to be (a few different apocryphal stories exist) but there is little disagreement with the idea that charm prices convey value and motivate customers.

These charm prices work because of the “left digit effect,” which proposes that people place more importance on the leftmost digit in a price. There for $79.99 seems closer to $70 than $80.

In one famous study, three different versions of the same mail order catalog were printed, with each version showing the same shirt at a different price. The shirt sold better at $39 than $44. This result is not surprising, and it illustrates the law of demand; as price goes down demand goes up. But the shirt also sold better at $39 than $34; illustrating that charm prices have an impactful effect and can undermine even our most basic expectations about the effect of price on demand.

Based upon your personal experience as well as readings from your text, answer each of the questions below (number each response):

1. Are there consumer or shopping task characteristics that may make use of a charm price more effective?
2. Do you think this tactic might be counterproductive and backfire for certain types of products or purchases? Why?