Why is gas sold to the 9/10th of a cent?

Question

For example $3.15 & 9/10th? Why don't gas stations just round it up to the dollar? Not like the 9/10th is really going to fool us that it's that much cheaper, especially with the prices over $3.

Answer 1

The use of fractional prices goes back to at least seventy or eighty years back. In 1914, a Texaco service station's gas price was 14.5 cent per gallon. But 9/10 cent fraction pricing came during the 'great depression' of 1930s. The great depression decimated the demand for gasoline. More than 2.6 million cars and trucks were taken off the road, and the consumption of gasoline was down a billion gallons per year in both 1932 and 1933. Gas stations fought to service. Production at the time was running far above demand and the market quickly went into a serious oversupply situation. It was at that time that premiums such as candy, cigarettes, ashtrays, dolls and countless other giveaway items made their appearance at service stations. In such a competitive climate the gasoline marketers of the day were attracted to the concept of fractional pricing. Incidentally mechanical gasoline pumps with provision to set fractional price made their appearance at service stations around same time.

When prices zoomed at the gas pumps during the oil crisis of the 1970s and federal price and supply controls were imposed, individual stations lost the autonomy to set prices. The government issued mandated formulas for pricing, which resulted in unusual fractional amounts. Most motorists were accustomed to the price ending in 9/10th of cent, but reacted negatively to other arbitrary fractions. So, 9/10-cent price convention continued.

Answer 2

people psychologically think it's cheaper.

that's why some product sells for 99 not 100

Answer 3

OK

Yep - you are 100% correct - except that people don't think like that.

You are driving and see a sign that says 3.02 for gas and one that says 3.01 and 9/10.  You only see the 3.01 so you automatically think it is a penny cheaper than the first gas station - even though it is 3.019.

It is purely a marketing and sales thing.

Hope that helps.