Here's a related excellent 2010 interview with William Poundstone on the psychology of pricing.
One sample story from Poundstone:
I'm a jeweler and for years, we've set up the carts in the malls where we sell the jewelry. And the very first year that we did that, my wife and I, we set up the cart and we sold, you know, the silver chains, sterling silver chains. And we went all around the mall and checked the prices of all the silver chains, and we priced our chains lower than anyone else in the whole mall, and put them out on display.
And they sat, and they sat, and they sat. So we were getting closer to Christmas and worried, so we doubled the price on every chain, and we put a 50 percent off sign in front of it, and they sold like crazy.
