This follows from my last post where the image displays the price as $1.379 per gallon but I write it as $1.38 in the post for a couple of times.
Almost everyone has seen this…and some of us must have observed this too. Gas stations always advertise prices with the third decimal place displayed (albeit in a smaller size). This has been going on for so many years that it’s almost in our blood and we never really care about it.
When gas stations display the price as $2.189 our brain interprets it as $2.18 and not as $2.19 as it should; if look at your receipt…you were charged $2.19 not $2.18 or $2.189. Here is a scanned copy of a fresh receipt for one gallon of gasoline from a local gas station. In fact, it looks like the terminal rounds off the dollars faster than the gallons pumped….I filled in 0.999 gallons and the price was already $2.19 (quick note: if you back-calculate the cost per gallon based on $2.19 charged for 0.999 gallons, it turns out to be $2.192 per gallon).
There are two aspects of this type of price display: psychological marketing and cheating.
All of you will be familiar with the marketing aspect employed by retail stores like Walmart/Target/HEB and others; most retail stores make use of price displays like $9.99 instead of $10.00. Our brain thinks in terms of $9 when the price is in fact $10. But, suppose I buy a non-sales-taxable food item at such a store for $9.99 and pay for it with a $10 bill, I will be charged $9.99 and a cashier will give back the 1 cent….they don’t round it to off $10. This type of price display is what I call “psychological marketing”.
Now apply this to gasoline; I buy a gallon of gasoline thats priced $2.189 and I am charged $2.19. Where is the $0.001 change? Can you give it back to me? Of course, we cannot give you back $0.001 because such a denomination does not exist in our currency. Well, that is precisely the reason why you cannot charge people in increments of $0.001, and that is precisely the reason why the price should be displayed as $2.19 and not $2.189. In my opinion, this three-decimal-places-price-display is not just “psychological marketing”; this is also cheating….so what if it’s just $0.001.
If you want to do that, why stop there? Why not display the price as $2.186 and round it off to $2.19..that’s also a valid rounding off. That way you can cheat people of $0.004 of unreturned change per gallon.
Again, it’s not a question of a lot of money when it comes to an individual filling up his tank, it’s a question of a senseless practice (unless I am missing something here). If you think of the 300,000,000 gallons of gasoline that is sold annually in this country, at $0.001 per gallon that comes to about $300,000 unreturned change per year…that’s enough to land someone in trouble.
I may have totally missed the bus here about why gas stations display prices in this manner; anyone has a better (correct) explanation (if there is one)?