The Price Precision Effect: Evidence from Laboratory and Market Data

  title={The Price Precision Effect: Evidence from Laboratory and Market Data},
  author={Manoj. T. Thomas and Daniel H. Simon and Vrinda Kadiyali},
  journal={Mark. Sci.},
We examine two questions: Does the roundness or precision of prices bias magnitude judgments? If so, do these biased judgments affect buyer behavior? Results from five studies suggest that buyers underestimate the magnitudes of precise prices. We term this the precision effect. The first three studies are laboratory experiments designed to test the existence of the precision effect and examine the underlying psychological processes. In Study 1, we find that precise prices are judged to be… 

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