Psychological pricing is a pricing approach that takes into account the psychology of prices, rather than just economic factors. It uses price to communicate something about the product, as consumers often perceive price as an indicator of quality.
One example of psychological pricing is reference pricing, or the use of odd prices (e.g., $9.99 instead of $10.00) that create the perception of a better deal. For prestige products, setting a high price can actually increase demand (the Veblen effect), as price becomes a status symbol.
