1 WIWIT SUGITO

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MARKETING & PRODUCT
MANAGEMENT
Penny Wise and Pound Foolish: The Left-Digit
Effect in Price Cognition
Manoj Thomas and Vicki Morwitz*

Do consumers perceive a nine-ending price to be significantly lower than a price one cent higher
(e.g., $3.99 vs. $4.00)?. In this article, we establish a conceptual framework focused on the
mathematical cognition analog model. Provide a cognitive account as to why and when a perceived 9-
end price magnitude is below a 1 cents higher price. In some specific situations, nine-finishing prices
only affect the magnitude perceptions. Firstly, all nine endings do not affect perceptions of
magnitude; they only affect perceptions of magnitude when the left-hand point changes. Second, they
are more likely to find left-digit implications when the internal bias between the two numbers
compared is weak. These results may not be limited to certain price classes or products, according to
our findings. The effect of a left-digit shift on the interpretation of magnitude seems to derive from
the way the human brain translates numerical signs into visual analog magnitudes.
Conceptual Background
Monroe and Lee (1999) used the analoge method of numerical cognition to describe the
encodings and analysis of nine-end values. The analog model suggests that we spontanously map the
quantitative significance of these numbers to an inner analog magnitude rate when faced with the two
multidigit numbers that must be compared. This numerical mark influences the precision of the
numbers being encoded. They address the following three effects: the left-digit effect, the distance
effect and the domain invariance.
STUDY 1A: LEFT-DIGIT EFFECT
With a nine ending versus a zero ending, the left side effect refers to the fact that $2.99 versus
$3.00 changes the leftmost number and that this change in the left point rather than the one cent
reduction influences the sense of magnitude. Consider for example a customer who contrasts the
prices of two pens: a target pen for $3.00 and a pen for another for $4.00. This consumer
automatically encodes these prices in an internal analog scale to mental magnitudes. The value of
$3.00 is likely mapped to the end below the scale, while $4.00 is mapped to the comparatively top end
of the scale.
Dehaene believed the process of numerical symbol conversion to magnitude takes place very
quickly and beyond knowledge. The magnitude encoding method starts as our eyes discover the digit
2 when we read numbers from left to right while calculating "2.99." The coded magnitude of $2,99 is
thus anchored to the most left digit (i.e. $2). The coded value of $2,99 is slightly less than $3,00.
From the statement, the researcher made a hypotheses:
H1 : Nine-ending prices will be perceived to be smaller than a price one cent higher if the
leftmost digit changes to a lower level (e.g., $3.00 to $2.99) but not if the leftmost digit remains
unchanged (e.g., $3.60 to $3.59).
DV1 : Nine ending prices
IV1 : Leftmost digit changes
We test this hypothesis using an experimental design between subjects in which two orthogonal
variables were manipulated: whether the price end of a target item was nine or none; and if its dollar
figure stayed the same or if its price end manipulation shifted. There were 52 participants.
Result
A 2 x 2 mixed factorial ANOVA was applied to the target pen perceived cost magnitude. The
perceived price difference between zero and nine ending rates was only raised by nine ending when
the dollar digit changed. As expected, magnitude perceptions of the comparison standards, which
remained constant at $4.00 across conditions, were not affected by the target price ending
manipulation ( F < 1).
Study 1B
The same as previous study, except for the following. First, the numerical stimuli in the same-
left-digit conditions were changed. Second, The researchers used a different scale to measure
perceived magnitude. The study used a 2 x 2 x 2 x 3 mixed factorial design. There were 63
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undergraduate students from a large northeastern university participated. Target price level was
manipulated within subjects at three different levels ($3.20 vs. $3.00 vs. $2.80).
Result
Since the order manipulation and product counterbalancing effects were not significant (F < 1),
the data were collapsed across these manipulations. A 3 x 2 mixed factorial been cited as evidence for
holistic or analogical encoding ANOVA with target price levels ($3.20 vs. $3.00 vs. $2.80) as the
within subjects factor and target price ending (nine vs. zero) as the between subjects factor. The
results were consistent with the left-digit-effect hypothesis. When the target level was $3.00 such that
the nine-ending condition (i.e., $2.99) resulted in a lower dollar digit, then the nine-ending price was
perceived to be significantly lower (M0 = 55.8 vs. M9 = 35.6; F(1, 122) = 20.92; p < .01 ƞ2 = .15).
However, when the target level was $2.80 such that the nine condition (i.e., $2.79) did not change the
dollar digit, then the nine-ending price had no effect (M0 = 44.4 vs. M9 = 42.8; F<1). These results are
similar to those obtained in study 1a. The left-digit manipulation had no effect on the magnitude
perceptions for the comparison standards (F<1).
Discussion
Results from studies 1a and 1b support the left-digit effect hypothesis. They show that lowering a
price by one cent to a 99 ending affects magnitude perceptions when the left digit changes (e.g., $3.00
to $2.99) but does not affect magnitude perceptions when the left digit is unchanged ($3.20 to $3.19
or $2.80 to $2.79). Study 1b also showed that distance between target number and the comparison
standard has no effect on magnitude perceptions when the left digit remains unchanged.
STUDY 2: ANALOG MAPPING AND THE DISTANCE EFFECT
The closer the distance perceived between the two analog measurements is, the more difficult it
is to differentiate them. Therefore, it takes more time to compare them. The further (closer) these two
prices are compared, the easier (difficulty) the magnitude of the 9-ending price is to be encoded.
Therefore, the farther (closer) the two prices, the less (greater) the left-most digit's distorting
influence.
H2 : A left-digit change caused by a nine-ending price is less (more) likely to affect the price’s
magnitude perception when the comparison standard is perceived to be far away (close).
DV2 : A left-digit
IV2 : Nine ending price (less/more), comparison standard level (higher/lower), distance.
There were 144 participants in this study.
Result
It used three-way ANOVA with comparison standard level, price ending, and distance as
between-subject factors. There was a main effect of price ending (F(1, 145) = 8.09 p < .01 ƞ2 = .05).
The effect of price ending was significant only when the target price was $1 lower or higher than the
comparison standard and not in the other two conditions.
Discussion
If the encoding of magnitude is simplified by the the numerical difference between both values,
the effect of the left-digit change on encoding of magnitude is weakened.
STUDY 3: RESPONSE LATENCY PATTERNS
The purpose of this study was (1) to gain insights into the cognitive coding mechanism behind
the left-digit effect using reaction latencies and (2) to test if the left-digit effect occurs in nonprice
domains. Therefore, both hypothesis2 and hypothesis 3 were supported by this analysis. The
participants determined whether a given three-digit number was lower or greater than 5.50 between
1.00 and 9.00. However, they analyzed how the response times for nine end numbers differed. More
importantly, we also examined how the response times varied for nine-ending numbers. Drawing on
the premise that the left-digit effect is a characteristic of the multidigit encoding process, we predict
that this effect and its interaction with the distance effect will manifest for most types of nine-ending
numbers. Thus:
H3 : Decreasing the distance between the numbers being compared will increase the left-digit
effect not only in the domain of prices but also in other types of nine-ending numbers.
DV3 : The left digit effect (in prices and other types of nine-ending numbers)
IV3 : Decreasing the distance
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The choosen target numbers were 1.99, 2.00, 2.99, 3.00, 3.99, 4.00, 4.99, 5.00, 5.99, 6.00, 6.99, 7.00,
7.99, 8.00, 8.99, and 9.00. The participants were 53. The participants determined whether a computer
shown target number was higher or lower than the 5.50 reference norm.
Result
An 8 x 2 within subjects’ ANOVA was used. The first factor, target level had eight levels: 2, 3, 4,
5, 6, 7, 8, and 9. The second factor was target number ending: zero versus nine ending. There was a
main effect of target level (F(7, 364) = 14.23 p = .01; ƞ2 = .21). More interesting was the significant
interaction between distance and number ending (F(7, 364) = 4.36 p < .01, ƞ2 = .08). The pattern of
means supported the hypothesis that nine-ending numbers tend to affect response times only when the
distance between the target number and the comparison standard is small. However in the case of 5.99
versus 6.00, response time was significantly higher for the nine-ending number (M0 = 853 ms to M9 =
923 ms, F(1,364) = 4.12, p < .05, ƞ2 = 01). In this case, the response time for the nine-ending number
was higher because its left digit led to a perception that it was closer to the comparison standard.
Discussion
The results of this experiment show that the left-digit effect on response time is more likely to
manifest when the nine-ending numbers are close to the comparison standard.
STUDY 4: REFERENCE FRAMES AND PSYCHOLOGICAL DISTANCE
In this experiment, the researchers manipulate framing to examine the effect of psychological
distance (hypothesis 2). Further, we examine these effects in yet another non-price domain, namely,
product quality ratings (hypothesis 3).
Method
Design. Three factors nine endings in QR ratings (nine vs. zero), numerical distance (low vs. high),
and psychological distance (low vs. high) were manipulated within subjects. Participants saw quality
ratings of three different brands in each of four different product categories. There were 27
participants.
Dependent Variables. For each product category, participants reported two dependent measures: the
perceived QR differences between the target brand and both comparison standards.
Result
It used A 2 x 2 x 2 x 2 mixed factorial ANOVA with QR ending (nine vs. zero), numerical
distance (low vs. high) and psychological distance (low vs. high) as within subject factors and product
presentation order as a between-subjects factor. When the psychological distance was high, then a
nine ending in the target QR did not affect the difference perception (M0 = 5.48 vs M9 = 5.46 F < 1).
These results served as manipulation checks to suggest that both numerical distance and psychological
distance affected perceived distance. However, since quality comparisons were done within the
reference frame relevant to each product category, only psychological distance (manipulated within
reference frames) moderated nine-ending effects, while numerical distance did not.
Discussion
These results have a number of significant consequences. Second, the empirical results from trial
3 indicate that the left-digit effect is not limited to the price sector. Secondly, the results suggest a
cautious interpretation of the distance effect.
GENERAL DISCUSSION
This work further illustrates the view expressed by past researchers that it is necessary and
deserves due attention to the question whether or not to use nine-end prices. Importantly, we show
that sometimes, but not always, nine-ending prices are perceived as lower than one cent higher. One
unanswered research question is whether the primacy effect of the left digits will be manifested in the
absence of the right digits 99. Our analyses just looked at 99 estimates. The processing of numbers
finishing in 99 may therefore vary from those ending in 98, 96, 95 or other digits. Throughout future
research, the results associated with such left-section internal changes should be investigated. The left
digit effect, distance effect, and other effects in price cognition which of these models are most
compelling is a question worth studying for the future.