Why do prices end in .99?
Why do prices end in .99? My father says it started at Bill's Texaco in Waco, Texas during a price war. I say it's a much older management technique to force employees to open cash register drawers for each transaction (making simply pocketing a bill more obvious). Since we're both inveterate bullshitters we've decided to leave it to you.
The topic does lend itself to wielders of the big shovel, no question about it. The most elaborate explanation I've seen is in Scot Morris's Book of Strange Facts & Useless Information (1979):
"In 1876, Melville E. Stone decided that what Chicago needed was a penny newspaper to compete with the nickel papers then on the stands. But there was a problem: with no sales tax, and with most goods priced for convenience at even-dollar figures, there weren't many pennies in general circulation. Stone understood the consumer mind, however, and convinced several Chicago merchants to drop their prices — slightly. Impulse buyers, he explained, would more readily purchase a $3.00 item if it cost "only" $2.99. Shopkeepers who tried the plan found that it worked, but soon they faced their own penny shortage. Undaunted, Stone journeyed to Philadelphia, bought several barrels of pennies from the mint, and brought them back to the Windy City. Soon Chicagoans had pennies to spare and exchanged them for Stone's new paper."
Very interesting, maybe even true (up to a point), but probably not the reason prices end in .99 today. The problem: Melville Stone ran the Daily News for only a few months before selling out in 1876. Judging from Daily News advertisements, prices ending in 9 (39 cents, 69 cents, etc.) were rare until well into the 1880s and weren't all that common then. The practice didn't really become widespread until the 1920s, and even then prices as often as not ended in .95, not .99.
So what's the real explanation? Having spent two hours poring over the microfilm — no guarantee that I'm not full of BS, but at least it's scientific BS — I'd say it was retail price competition in the 1880s. Advertising prices in the newspapers was rare before 1880 but common after 1890. At first prices were usually rounded off to the nickel, dime, or dollar, but it wasn't long before a few smaller operators looking for an edge began using what might be called "just under" pricing (49 cents, $1.95, and so on), no doubt in an effort to convince the gullible they were getting a bargain.
The idea caught on surprisingly slowly. Even in the 1920s some large merchants still rounded prices off to the nearest dollar or on larger items to the nearest $5 or sawbuck. Today's custom of having nearly every price end in 99, 95, or 49 cents or dollars (or just a 9 for items under $5) is of fairly recent vintage. The practice bespeaks a certain low cunning, but it's also pretty obvious and trying to find out who invented it is like trying to find out who invented the hat.