“Sharp” Numbers Sell Houses - Page 2

There are all kinds of other considerations that make up a purchase decision, of course—things like bank account, stress, level of motivation, even the day’s weather. Nonetheless, house sellers frequently round off the asking price. Those that do not may have the edge.

Retailers have long sensed this effect and profited from it. The retail practice of ending prices in 9s exploits a related aspect of the way we process numbers. Psychologically, the difference between $19.99 and $20.00 is often the difference between buying and not buying. While the “sharp” number is a penny cheaper (not necessarily a strong enough advantage to clinch the sale), the number 1999 also benefits from a related fact of numerical cognition—the “Left-Digit Effect.” Put simply, if a price increase changes the leftmost digit to a higher number (in this case, from a 1 to a 2) it might just be No Sale.

Since we process multidigit numbers from left to right, says Thomas, “one explanation is that encoding the magnitude of a multidigit number begins even before we finish reading all the digits.” It is the change in the left digit, not the penny, that makes the difference.

If we are talking about housing prices, the change from 0s to 9s—from rounds to sharps—can add up to a lot of pennies. It can mean a difference of thousands of dollars for individual buyers, and millions for the home-building industry at large.

Article Author: Dirk Hanson

Dirk Hanson is a freelance science reporter and novelist who lives in Minnesota. He has worked as a business and technology reporter for numerous magazines and trade publications, and is the author of "The Chemical Carousel: What Science Tells Us About Treating Addiction."
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