The companion site for the book Life's Little Mysteries: Answers to Fascinating Questions About the World Around You has a short post summarizing why most prices end with .99. Of course, there's the obvious "psychological pricing" reason that when a shopper sees something that costs $5.99, the .99 is subconsciously ignored, making the item much more attractively priced than if it was $6. But more intriguing is this bit summarized from a 2003 Harvard Business Review article titled "Mind Your Pricing Cues" (PDF). From Life's Little Mysteries:
"Some retailers do reserve prices that end in 9 for their discounted items. Comparisons of prices at major department stores reveal that this is common, particularly for apparel," wrote Eric Anderson, professor of marketing at Northwestern University's Kellogg School of Management, and Duncan Simester, professor of management science at M.I.T.'s Sloan School of Management, in their article.
For instance, the clothing stores J. Crew and Ralph Lauren typically price regular merchandise in whole dollar amounts and stick 99-cent endings on discounted items. These retailers purposely avoid ending their regular prices in .99 so that consumers won't associate the items with cheap deals. By contrast, stores attempting to project an image of selling underpriced goods will make it a point to end all their items' tags – regularly priced and discounted alike – in .99.
"Why Do Most Prices End in .99?" (Life's Little Mysteries)
