Selling your house? Use a precise price
The precision or roundedness of prices can affect magnitude perceptions, which may lead to faulty judgments, according to a study by assistant professor of marketing Manoj Thomas, associate professor of marketing and economics Vrinda Kadiyali, and assistant professor of applied economics and management Daniel H. Simon of Cornell University. Their research was the highlight of more than a dozen articles including: "Maybe Not a 000-Sum Game," published in the Washington Post (2/15/08); "Precise pricing spurs buyers on the fence," published in the Chicago Tribune (2/24/08); and "Price fixing: In this market, selling a home requires savvy," published in the Wall Street Journal (2/27/08).
The study, "Do Consumers Perceive Precise Prices to be Lower than Round Prices?" finds that people incorrectly judge precise prices such as $305,425 to be lower than rounded prices of similar value such as $305,000. The study was conducted using both laboratory and market data from residential real estate transactions.
People learn to associate precision with smaller magnitudes, and this association biases their price magnitude judgments, say the authors. Buyers perceive precise list prices to be lower. These results have substantive implications for buyer and seller behaviors, and theoretical implications for the understanding of the price cognition process. For those selling their homes or other major items, it appears that precise prices may fetch a higher final sale price.
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