![]() ![]() Sure, they’d lose 4 cents by doing that, but I notice that an increasing number of stores already just give me a few pennies for free to avoid the hassle of counting out each coin. But in that case, if the penny is removed then a non-cooperative firm could just lower the price to $9.95 and steal business away from other firms. Any firm that did not cooperate would steal business from other firms. If raising prices would actually raise revenue for grocery stores, then why not do it even before the penny is eliminated? One answer is that it’s a game theory problem this action only benefits stores if all firms raise prices from $9.99 to $10.00. ![]() On a second look it appears that she predicted this would happen. At first I assumed that the study had showed that grocery stores usually rounded up after the penny was abolished. I’m not quite sure I understand what is being studied here. She then made a discovery: a typical grocery store would earn an additional $157 of revenue from rounding each year. She excluded the volume of credit and debit card transactions, which aren’t affected by penny rounding. “I simulated depending on what province you’re in, what tax rate you have, and how many items you buy,” she said. She found 60.8 per cent of grocery store prices ended in 8 or 9.Ĭheung put those numbers through a computer simulation program that generated hypothetical purchases. A 19-year-old Canadian, Christina Cheung, has done a study of penny abolition in Canada and here are her findings: ![]() There is the danger that prices will be rounded up more than down. Tyler Cowen links to a recent study of Canadian grocery store pricing (the first three lines are Tyler): ![]()
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