Why do prices always say 1.99 why not 2.00?

Good question, it's an illusion created to make us think we're getting a bargain.

Studies have shown that people immediately focus on the dollar amount on the price tag. We all know it's only a penny difference, but the quick subconscious response is to go for the 1.99 item rather than the 2.00.

Here's another question along the same train of thought:

Why Do Gas Prices Always End in 9/10 of a Cent?

ANSWER:

There are several theories to this. One is that is a marketing ploy in the gas price wars that go back more than 70 years. It is similar to other retail pricing like $19.99 rather than $20, or $29.99 rather than $30. It gives the appearance of being less expensive.

Another reason may be due to taxes, the 1933 increase in federal gasoline taxes from 1 cent per gallon to 1.5 cents could have encouraged the start of fractional pricing for gasoline. Why the continuation of the 9/10s-of-1-cent pricing? The pricing is built into the gasoline pumps, and it would cost the industry, and individual retailers, too much to change them.

One more theory is the extra "tenths" is a very old tradition that's never gone away. In 1935, a Reno Nevada newspaper wrote about "selling third grade gasoline at eight and nine-tenths cents a gallon."

In those times, a penny had considerable value. To raise the price of gasoline from 8 to 9 cents would be more than a 12 percent hike. To compete, gas stations raised prices by tenths of a penny. Around this time, federal and state excise taxes were also introduced in increments of tenths of a cent, so it made sense to keep the decimal value.

GeneL has given a good answer.

There's another reason too (though largely historical now).

If an item was priced at 2.00 the store assistant might just take the exact money from the customer and not ring it up on the cash register. But at 1.99 the customer would expect a penny in change, so the assistant would have to ring up the sale so as to open the cash register drawer and get out the change.

According to this source, consumers associate $.99 endings on prices with the idea that the item has been marked down to the furthest extent possible, or at least priced to the best possible bargain.

On the other hand, this source says that prices ending in $.00 are a signal of premium quality.

So an ad like this:

****** Diamond Rings!! ******

====Only $249.99====

Don't Miss Out on this Bargain!

****** ********** *********** ******

is sending a different message from this ad:

-----------------

.Tiffany Diamonds

........$250........

----------------------

http://www.wisebread.com/party-like-its-1999-the-p...

I read a study one time of Little Golden Books. These were children's books that sold in the 1940s and 1950s for 25¢. When sales drooped, the publishers got advice to RAISE the price. They were doubtful, but in 1962 they raised the price to 29¢ as recommended, and sales increased.

http://en.wikipedia.org/wiki/Little_Golden_Books

Consumers glance at the first digit and it feels a whole dollar cheaper than if it was priced $2.00. Basically, its a mind trick which makes people feel as if a product is cheaper and thus more affordable. It is probably most noticable in cars and houses where it feels several grand cheaper than it really is.

If you are a paranoid consumer like me, I would suggest that you round up a whole buck or whatever it is and write it out or close your eyes to visualize it.

In the ancient days (before taxes) merchants set the price at xx.99 to make the clerks actually pay attention to the money they received because they had to count the change, or make change. This reduced errors (lost income) in the transaction of buying and selling.

As time advanced, merchants realized the value of the "less than xx$$" and other promotional themes as mentioned in the other answers.

Its a smart way to attract customers to buy products, the customer will normally choose the cheapest prices ,$99 is less than $100, $199 is less than $200, its easy and simple.

Lol are you 8 years old? Let me explain. In adds, they'll say it's only 49 dollars when it's 49.99. That's 1 cent away from a dollar. They're cheating the money out of you in a way. It's just to get as much profit possible

GeneL is correct in that it is a psychological 'trick' the retailers play on us. It works, too. I was shopping with a friend one day and I pointed out this great looking pie. It was marked $7.99. He looked at it and said "Wow, and it's only 7 dollars!" He is the retailer's dream customer!