Why do gas stations have a fraction of a cent added to every gallon?
In: Economics
In the United States, the fraction of a cent per gallon is always 9/10 of 1 cent, and the cents digit often ends in 9. This is due to a belief among marketers that a price like $3.59 9/10 is actually perceived psychologically by consumers as $3.59 instead of nearly exactly $3.60.
Back when gasoline prices were cheap, like 30 cents per gallon, it made sense to calculate the total based on fractional cents. Nowadays with gasoline prices 10X that much, there’s really no need, particularly because all filling stations round their prices up by 9/10 of 1 cent anyway, so all prices are still in exactly 1 cent increments with 0.001 subtracted from the final price.
I observed during a recent trip to Japan that they don’t round their prices this way. It seems as if the station simply adds a fixed profit margin to whatever price they pay for the gasoline, and it comes out to some price like 175.80 yen per liter. I didn’t see anything ending in “9”.
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