Which of the following prices would be the best, from the seller’s perspective: $29.95, $29.99, $30.00 or $30.05?

According to the principle of ‘Price Elasticity’, the highest the price, the lower the sales. Therefore $29.95 is the price driving the largest volume.

According to very basic psychology, Customers make a divide between the ‘less than $30’ and the ‘more than $30’, putting $29.95 and $29.99 on one side, and $30.00 and $30.05 on the other. People being attracted toward cheaper prices (except if it’s a Veblen good) to maximize their surplus, $29.95 and $29.99 will drive significantly more volume.

My take: the answer relies within the market, and it’s $29.99; but not for the reason you may imagine!

Let us pre-suppose the market is efficient. Imagine millions of people sell millions of products at the price they want. Run this ‘experiment’ for a little while, and you could observe the most efficient price. The good news is, thanks to the Internet, such information is available. You ‘simply’ have to count the number of occurrences for each possible price.

Even more important, if some price levels are way more frequent than others, Buyers will tend to mentally settle on those prices. By showing what Buyers have in mind, one reduces their effort to ‘visualize’ the price. Reduced effort equals happier customers equals more sales. Therefore you’d better put your prices on those ‘magnets’.

Here are a few ‘best sellers’ in the $10 to $50 range:

$10
$14.95, $14.99 or $15.00 (all equivalent)
$19.99
$25.00
$29.99
$35.00
$39.99
$45.00
$49.95 or $49.99 (equivalent)

Oddly enough, $17.99 is more popular that $18.00, but $38.00 is more popular than $37.99.
By far, the most common price level in the whole range is $19.99. As for the ‘loosing price’, it’s $49.65.

Next time you price, remember the best price from the Seller’s point of view is often the price the Buyer had in mind… Except if you really want her to remark your price!

A caveat: One would have to poll the number by product categories. Nothing proves the ‘psychological’ price levels of food or electronics are the same.