Psychological Pricing encourages consumers to make purchases based on emotion, rather than rational considerations about the price.
The most common way markets do this, is by pricing a product in a way that makes it look like it's on sale, or significantly cheaper, though it's not. This has happened to me before in a grocery store, I noticed the price was reduced from $2.89 to $2.79 and even though it's only a $0.10 difference (that I am aware of now) at the time I believed it was a larger difference. Retailers are able to tug at consumers emotions by having BOGO sales as well.
