Why $9.99 Feels Like a Completely Different Price From $10
Walk through any store and you’ll notice something odd almost right away. Prices almost never end in a round number. They end in 9, over and over, on everything from a $4.99 coffee to a $19,999 car. A 1997 study published in Marketing Bulletin found that roughly 60% of advertised retail prices ended in the digit 9, compared to about 30% ending in 5 and just 7% ending in a clean 0.
The reason comes down to something researchers call the left-digit effect. When people read a price, they anchor heavily on the leftmost digit and barely register the rest. A price of $19.98 gets mentally filed closer to “$19 territory” than “$20 territory,” even though it’s one cent away from twenty dollars. Marketing professors Manoj Thomas and Vicki Morwitz documented this in 2005, showing shoppers consistently underestimate 9-ending prices compared to their true value.
There’s a second layer to it too. Researchers Marjorie Stiving and Russell Winer found that a price ending in 9 does double duty. It makes the number itself feel smaller (what they call the “level effect”), and it signals to shoppers that an item is on sale or a good deal (the “image effect”), even when nothing has actually been discounted. That’s why “$19.99” quietly does more psychological work than “$20,” despite the difference being a single penny.
The Option Nobody Picks Is Still Doing Its Job
One of the clearest demonstrations of what researchers call the decoy effect came from behavioral economist Dan Ariely, who tested subscription pricing for The Economist magazine. The original offer had three tiers: web access only for $59, print only for $125, and print plus web access, also for $125.
Almost nobody wanted the print-only option. Why pay $125 for print when the same $125 got you print and web? But when Ariely gave people this exact lineup, 84% chose the print plus web bundle, 16% chose web-only, and print-only got zero takers. He then ran the experiment again with the print-only option removed, leaving just two choices at their original prices. This time only 32% chose the bundle, and 68% picked the cheaper web-only plan.
Nothing about the bundle itself changed. The only difference was the presence of an option nobody wanted. That “decoy” made the bundle look like an obvious win by comparison, since it beat the decoy on every dimension for the same price. Once people had something to compare it against, the choice felt easy.
Why Subscription Plans Almost Always Come in Threes
Basic, Pro, and Premium. Good, Better, and Best. Almost every software subscription, streaming plan, and even car wash membership is priced this way, and it’s not a coincidence. Consumer researcher Itamar Simonson documented this pattern back in 1989, in what’s now called the compromise effect, also known as extremeness aversion.
When people aren’t sure exactly what something is worth, they tend to avoid the extremes. The cheapest option feels like it might be missing something important, and the priciest option feels like overkill. The middle tier, sitting between the two, ends up feeling like the “safe” and “reasonable” choice, partly just because of what’s sitting on either side of it.
This is a different trick than the decoy option above. There’s nothing dominated or obviously inferior about the cheap or expensive tier, both are perfectly reasonable products on their own. But by framing the middle plan as the compromise between “too little” and “too much,” a business can nudge most customers toward the plan it actually wants to sell the most.
That $200 Menu Item You’ll Never Order Is Still Doing Something
This same idea shows up on restaurant menus, and it traces back to one of the most famous experiments in behavioral science. Psychologists Amos Tversky and Daniel Kahneman spun a rigged wheel of fortune in front of participants that landed on either 10 or 65, then asked them to guess what percentage of United Nations countries were African. People who saw the wheel land on 10 guessed around 25% on average. People who saw it land on 65 guessed around 45%, even though everyone knew the spin was random and had nothing to do with the actual answer.
That’s anchoring: the first number you’re shown quietly resets what feels reasonable for every number that follows, even when that first number is meaningless. Restaurants apply the same principle by placing an absurdly expensive item, a $200 steak or a $500 bottle of wine, near the top of the menu. Almost nobody orders it. It doesn’t need to sell. Its entire job is to reset what feels like a “normal” price, so the $38 entree two lines down suddenly looks perfectly reasonable by comparison.
The same logic applies to conversion rate optimization on a website’s own pricing page, not just paper menus. Where a price sits, and what it sits next to, changes how reasonable it feels, often more than the actual number does.
Curious whether your own pricing page is working with these effects or against them? See how DAM’s website design team can help →
