9/10 of a cent

private joker · #1 09-07-2005, 06:36 AM

How come gasoline is the only product that is priced to the tenth of a cent? Tacos are not $1.99 and 9/10. Car washes are not $6.99 9/10. A large Pepsi is not $1.50 9/10. Why just gasoline? And really, whom do they think they are kidding?

I wonder if I'll get any serious answers to this from economics students or merchants.

Jack of Arcades · #2 09-07-2005, 06:42 AM

Think of it as the vig on tourney, IE 2.89+.009. That's how it essentially started, with the 9/10th or 5/10th of a cent tacked on because that was the tax imposed on gas sold.

MCS · #3 09-07-2005, 07:43 AM

Here are two ideas I thought up.

Because almost no one buys gasoline one gallon at a time, they can get a few extra cents out of each customer. So the 9/10 will actually matter.

Also, the calculation of purchase cost is automated, so it's not more complicated to have extra tenths of cents. It would be harder at a grocery store where you'd have to have nonstandard cash registers.

canis582 · #4 09-07-2005, 08:17 AM

I dont believe they give you the extra penny back when you get to your 10th gallon. Imagine how much extra money they have made over the past 20 years.

I forget where I was, but I swear I saw one with x.xx and 8/10s.

gobboboy · #5 09-07-2005, 11:39 AM

[ QUOTE ]
I dont believe they give you the extra penny back when you get to your 10th gallon. Imagine how much extra money they have made over the past 20 years.

I forget where I was, but I swear I saw one with x.xx and 8/10s.

[/ QUOTE ]

Donnie's discount gas!

MrTrik · #6 09-07-2005, 11:16 AM

[ QUOTE ]

Because almost no one buys gasoline one gallon at a time, they can get a few extra cents out of each customer. So the 9/10 will actually matter.

[/ QUOTE ]

They are not extra cents. The price is clearly stated. It was put correctly later in the thread by Jersey Guy.

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Imagine a gallon of gas priced at $3.509. Most folks don't round up in their heads and think of it as $3.51, but 10 gallons = $35.09 or a penny less than $35.10.

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MCS · #7 09-13-2005, 12:41 AM

[ QUOTE ]
They are not extra cents. The price is clearly stated. It was put correctly later in the thread by Jersey Guy.

[/ QUOTE ]

That's pretty nitpicking. I thought it was obvious what I meant, but perhaps not.

Although the more I think about it, the less I think this matters. Because if you set prices in whole cents, is there anyone who would go significantly out of their way to buy gas for $2.86 instead of $2.87?

P.S. Since we're being precise, it's Jersey Nick, not Jersey Guy. [img]/images/graemlins/tongue.gif[/img] And I acknoweledge that my earlier grammar ("pretty nitpicking") is imperfect.

private joker · #8 09-13-2005, 12:50 AM

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Although the more I think about it, the less I think this matters. Because if you set prices in whole cents, is there anyone who would go significantly out of their way to buy gas for $2.86 instead of $2.87?

[/ QUOTE ]

That's what I'm saying. People are talking about the "psychology of pricing," given that people don't round up. First of all, Duh. The reason sodas are $1.99 and not $2.00 is because who wants to pay 2 bucks for a Pepsi when they can get one for a dollar and change.

But that's not the issue. If you want to use that psychology, then charge $2.59 a gallon instead of $2.60. Maybe when gas was 26 cents, the 26.9 sounded better than 27. But these days it's totally insignificant and stupid.

Also, the point of the 9-price psychology is to get consumers to buy things they might not ordinarily purchase if the price were higher. "I'm thirsty, but I don't want to spend 2 bucks on a Pepsi -- oh cool! Here's one for just $1.99, I think I'll get it," etc. That's not the case with gas. People who go to a gas station aren't wondering if maybe they should splurge and fuel up their car. They have to in order to reach their destination. You're not going to lose business by saying an even $2.67 as opposed to $2.66 and 9/10. This is *especially* the case because *every* gas station does it. So it can't even be a matter of competition in the marketplace.

It's dumb and I still don't understand it. The only reasonable argument thus far in the thread is the tax theory, but I'd like to hear more concrete evidence of how gasoline is taxed before I believe it.

ChipWrecked · #9 09-13-2005, 03:02 AM

Gas Taxes

Bulldog · #10 09-13-2005, 10:21 AM

Say I'm running a busy gas station selling 8,000 gallons per day, at a current price of $2.799. I could decide to stop the .009 silliness and change my price. I'm not going to change it to $2.80, because the $2.799 across the street and the $2.749 a few miles away all of a sudden look a lot better. So I've gotta change it to $2.79. Now I've got a lower price than the $2.799 across the street, but almost nobody even recognizes that, so I see no bump in my volume sold.

Meanwhile, I'm selling 8,000 gallons per day for $72 less than I was yesterday. Even if I profit $0.40/gallon (probably a high guess), I'd have to sell 180 more gallons (or about 15 more fill-ups) to break even. Bad business decision for me, huh? [img]/images/graemlins/frown.gif[/img]

I agree that the $0.009 is silly, but I don't see how it is ever going to change.