In our interactions with the world, we pursue simplicity. It is no different when we are buying. We want information that allow us to make not only good decisions but also fast ones. In case of considering the purchase of a product, we expect that information about this product would be easy to understand and to evaluate, including its price.
Round prices are simple prices. A major characteristic of a round price is that its number has only few significant figures. Fewer significant figures in its price, easier to evaluate if the product is cheap or expensive. This is the reason we adopt to the following definition:
A round price has only one or two significant figures and is not just below another round price.
In order to grasp its meaning, let’s first see or remember what is a significant figure, also known as significant digit. All non-zero digits of a price number are significant figures. For instance, in $270, both ‘2’ and ‘7’ are significant figures. But the ‘0’ is at end of this price is not. Trailing zeros are not considered significant. So, $270 has only two significant figures and therefore it is a round price. Even if write this price as $270.00, it remains round. The decimal point doesn’t change the count of non-zero digits.
Leading zeros, i.e. zeros at beginning of the number, are also not considered significant. For this reason, $0.05 has only one significant figure and $0.55 has only two. Needless to say that both prices are round. This is also the case of two hundred and seventy dollars even, if it is written in an exotic and probably an unaccepted way: $0,270. Different representations of a price do not change its roundness, as long as in base 10 and in the same currency.
On the other hand, $201 is not round price according to our definition, also no matter how it is represented. That’s because this price has a zero between ‘2’ and ‘1’. Any zero surrounded by non-zeros do count as significant. Thus, the price has three significant figures and, by definition, it is not round. Other prices that are not round because they have three or more significant figures: $123, $477.00, $19.90, $6,582.00 and $10.04 (the last two examples with four significant figures).
Although all round prices have only one or two significant figures and the opposite is necessarily true. You will see in the next pages that, for instance, if $39 may be considered just below $40, then it would not be round. It is open question what characterizes being just below another round price. However, one thing is for sure: all prices with only one significant figure are always round. Examples: $100, $200, $30, $4,000, $0.05, $0.60, $7, $800,000 and $90.00. For curiosity’s sake, we name one-significant-figure prices as plain prices or obvious prices.
It is optional to read why none of the three-significant-figure prices is considered round. More important is the next page: