Each Saturday evening I put gas in our cars, usually just the minivan since my car doesn’t given driven as much. For as long as I can remember gas prices have included a 9/10s of a penny in the price per gallon. This always stood out to me because you don’t normally see prices listed with fractions of a penny. It is so uncommon that I think most people completely ignore it.
The reason they do this is clear, they make more money. While I don’t think you can charge a credit card a fraction of a penny, most people don’t buy just one gallon of gas. To keep things simple lets say I bought 10 gallons of gas for the minivan last week. Without the fraction of a penny the price would just be $3.24 * 10 = $32.40. With the fraction of a penny it is $3.249 * 10 = $32.49. They made an extra $0.09 from my purchase. Go on to multiply that by the number of other people who made similar transactions at the same gas station that day.
I don’t think we are talking huge numbers here by themselves, but the cost to generate that additional revenue is super small. The computers in the pumps just need to be able to calculate the price correctly, which the have to do any way. Even if a gas station is only making an extra $500 per day by adding on an extra 9/10s of a penny, the cost for that extra $500 is nearly zero.
This type of pricing pattern really only does well for per unit pricing where people nearly always buy more than one unit at a time. If everyone only purchased one gallon of gas at a time then the fraction of a penny really wouldn’t make a difference.
The other place I’ve seen fraction of a penny pricing is Amazon Web Services. Here is the EC2 pricing for light utilization reserved instances:
The EC2 pricing differs from the gas pricing in a couple of ways. First, not all of the EC2 fractions of a penny are 9/10s. Second the per unit pricing (one hour) of EC2 is so small that the fractions of a penny make up a significan portion of the price. That probably also explains why they aren’t all 9/10s of a penny.
Amazon isn’t the only cloud service for which this applies. Look at the pricing of Google Compute Engine as another example.
Since these last two examples involve computers and fractions of a penny, I’ll let Richard Pryor take care of the rest:
What other products or services do you purchase that consistently set their prices at a fraction of a penny?