Round numbers bias can cost you big money


Suppose you are about to put your house on the market. Should you list it for round number, say, $250,000 or an exact amount such as $252,153?

According to a recent study, if you price it at the former you could be leaving money on the table. Manoj Thomas, Daniel H. Simon and Vrinda Kadivali of Cornell University found that we perceive round numbers as greater than exact ones of similar magnitude, and therefore assume exact numbers are a better deal.

This "precision heuristic" also discourages haggling, because buyers who perceive an exact number as a lower price presume there is less wiggle room for negotiation. The authors suggest this is a learned behavior based on the human propensity to use round figures for large quantities, so we unconsciously expect large exact numbers to have some concrete (and immutable) basis. (Car dealers use this tactic when they show you "our cost').