Distortion of price discount perceptions through the left-digit effect

Abstract

Through two experiments, we examined the consumers’ process of comparison of regular and sale price information in advertisements. This is an extension of studies of the left-digit effect with different price levels and multiple digits conducted using Taiwanese data. First, we find that in a comparison of regular and sale prices, specifically three-digit integers with different leftmost digits, consumers perceive the price discount to be larger when the left digit is small (e.g., 1 or 4) than when it is large (e.g., 7). The lower the two prices being compared, the more likely it is that the left-digit effect will exist. Second, the perceived discount is likely to diminish when the number of digits is increased to produce a four-digit integer. In other words, the number of digits can affect perceptions of the numerical difference when comparing two prices. Thus, the effect of a left-digit change to produce a nine-ending price would be weaker for higher-priced products. The findings indicate the existence of a novel boundary to the left-digit effect.