Ask HN: $4.99 VS $5 - Does odd number pricing work?

Apparently they had to send the receipt and the money via pneumatic tube back to the office where they would file the receipt, make change, and return it to the register. Customers would wait for their penny, helping to keep the employee from pocketing the cash and destroying the receipt.

”Amazon has run A/B pricing experiments, and learned the hard way that customers do find out, and are upset about it. So their new policy is: if they run a price experiment, you’ll always get the lowest price in the experiment, when you get to the checkout. (So you might click on something with 5% off - when you get to the checkout, it’ll give it to you for 10% off, because that was the other offer that you didn’t see).” -AndrewMcG

Here's a link to the pretty extensive study that two guys from Cornell published -- Heuristics in numerical cognition: implications for pricing http://forum.johnson.cornell.edu/faculty/mthomas/HeuristicsI...

On a semi-related note, I remember telling all my friends in the music biz how iTunes was making a huge mistake by crossing the $1 threshold when they jumped up from $.99 to $1.29 ... at <$1, fans didn't think too much about the purchase. once they crossed it, it only accelerated the progression of pirating.