At the bottom of the previous page, we started to explain a key concept. Now, we are going to give it a (strange) name and to define it:

The “discount” limit is the maximum relative distance a price can be from any of its  corresponding round values in order to be considered just-below

Let us translate the definition in terms we have already seen. We’ll use the same examples of the previous page. Distance between two prices is the subtraction of the smaller one from the larger one. Distance between a price and its corresponding round value is the subtraction of the price from the round value. It is the one dollar in case of the $39-price (40 – 39 = 1) and the twelve dollars in case of $888-price (900 – 888 = 12).

Actually, such distances in dollar, or in other currency, are absolute ones. A relative distance between two prices is measured in relation to one of these prices and it is normally presented as a percentage of such price. For example, we could measure the relative distance between $40 and $39 either as a percentage of $40 or as a percentage of $39. Since it easier to divide 1 by 40 than by 39, we choose the first option. $1 is 2.5% of the round value of $40. Its no coincide the fact that is also easier to divide 12 by 900 then by 888. Round prices are always simple, regular prices and candidates to just-below prices are not. So, $12 is 1.33% of $900.

In other to make calculations and comparisons easier, we also define the “discount” limit as a percentage of the round values. For instance, if the “discount” limit is 2%, the maximum distance a price that is just below $40 is eighty cents (40 x 2 / 100 = 0.80). In this case, prices greater than $39.20 are JB, but $39 is not.

In contrast, $888 is just below when considering the same “discount” limit of 2%, since its greater than $882 (900 – 900 x 2 / 100).

At this point, it is clear that the “discount” limit is a limit, but why the designation in quotation marks?  “Discount” is an ironic name we give the tiny reductions that transforms a round price into a JB one. A “discount” is a “gift” that a seller gives his/her costumers, but keeps secret about it. Typical “discounts” are tiny. Frequently they are only a mere cent. Can you imagine the disappointment, the anger or even the rage of costumers when a seller tells them he/she gave a discount of $0.01?