Phony Pricing

The Friday File: While prices ending in $0.99, like $4.99 of $399.99, known as charm pricing, look good, they are on average 18% more expensive than when identical items have different prices. Stores do it because we think it signals a good deal! Worse, when firms raise prices, as they are now frequently doing, the new higher price is often a charm price to soften the blow.