One Dunkin’ Donuts store is taking a stand against the penny

http://freakonomics.blogs.nytimes.com/2010/11/01/a-dunkin-donuts-store-exhibits-penny-sanity/

by cwan • 16 years ago

34 41 16 years ago

freakonomics.blogs.nytimes.com

jusob• 16 years ago

Why don't they modify the prices, so that the after-tax amount is always a multiple of 0.10? That would make more sense since they are creating the problem in the first place by choosing not rounded prices.

tptacek• 16 years ago

Probably because changing the actual prices on the board is a Big Deal; they probably paid at least six figures to devise the exact pricing scheme they have. Rounding pennies at the register on the other hand is not a big deal; nobody should care.

BrandonM• 16 years ago

This isn't possible due to rounding. If you live somewhere with 7.5% sales tax (just to pick a number) and you want an item to be exactly $1.50, you have to price it at $1.40. Want five of those? The total comes to $7.52.

a-priori• 16 years ago

So just always use the after-tax prices, and make that a multiple of $0.05. Show that price on the display boards, on the receipts, etc. I know they do this in Switzerland, for example.

In Canada (and the US?) that's what happens with gasoline, but not with anything else. I think that's strange.

seanalltogether• 16 years ago

Better yet, why is it not possible to just force the conversion at the till itself. Are most POS machines not capable of having the taxes rounded to the nickel instead of the penny? Then it all simply becomes transparent to everyone involved.

duck• 16 years ago

I'm pretty sure pricing is set by the franchise's corporation office, so that would be no easy feat. Also, if the tax percentage changed all the pricing would change as well.

aaw• 16 years ago

Pret A Manger (a sandwich chain) used to do something like this in NYC a few years back. Everything you bought would have an odd price like $7.13 or $10.32 so that once everything was rung up, your total was always a multiple of 25 cents. I loved the idea but I guess they found some problems with it because they eventually stopped doing it - it would be interesting to know why.

toolate2• 16 years ago

I always consider Pret to be a coffee shop, but even Wikipedia says they're a sandwich store.

aidenn0• 16 years ago

I don't know if you live in the US or not, but this is basically impossible. First of all some jurisdictions make that illegal. Second of all, large businesses then can't have advertising campaigns that advertise the price due to differing sales-tax rates. Even small differences matter in high-volume low-margin businesses.

Even local businesses can have this problem. The city I live in imposes a small (like .25%) sales tax on top of the state sales tax, so that if you are outside city limits, you pay a different tax rate than if you are inside city limits.

psadauskas• 16 years ago

I worked at a movie theater in college, they had it set up so that the post-tax prices for tickets and concessions always came out to an even quarter. Made it a lot faster for the cashiers, since they only ever had to have quarters in their drawer.

symkat• 16 years ago

This would be nicer if they rounded benefiting the customer at all times.

Although I don't exactly see how a few pennies can slow down transactions in any significant way. You can get up to one more penny than you would get in quarters. Pennies come in roles >2 as large as quarters.

ZachPruckowski• 16 years ago

It's not the maximum amount of pennies, but the average. Only a handful of prices result in change requiring 3 quarters or 4 dimes, but 40% of prices require 3-4 pennies in change.

gojomo• 16 years ago

The usual coin-change-making algorithm for X cents in the US is...

(1) pull ⌊X/25⌋ quarters; set X = X%25

(2) pull ⌊X/10⌋ dimes; set X = X%10

(3) pull ⌊X/5⌋ nickles; set X = X%5

(4) pull X pennies

No pennies means there's never a step 4 -- also the only step that might require pulling 4 coins. When dealing with a line of people during the morning coffee rush, fractions of a second count.

z0r• 16 years ago

I wish everybody would do this.

michaelhart2• 16 years ago

and I as well. it's frustrating when waiting in line and someone's ahead of you waiting on change. just swipe your debit card and keep the line moving!

nuclear_eclipse• 16 years ago

it's frustrating when waiting in line and someone ahead of you can't remember their debit pin, or their card isn't swiping correctly, or they insist on writing "see ID" on their card's signature strip but don't get their ID out until asked. Just give correct change and keep the line moving...

mindslight• 16 years ago

it's more frustrating seeing people deprecate cash without any (implemented) alternatives that provide privacy or security.

jpr• 16 years ago

FYI, in EU (or at least in Finland), euros are rounded to the nearest five cents and stores don't even accept the 1 and 2 cent coins, even though they exist.

eru2• 16 years ago

Germans have to endure 1 and 2 cent pricing.

knweiss• 16 years ago

But at least we have after-tax prices.

stavrianos• 16 years ago

Australia, to the best of my knowledge, doesn't even have a denomination smaller than the nickel.

davidcuddeback• 16 years ago

I just got back from a trip to Australia and New Zealand, and this is one of the things that I noticed while I was over there. Neither of those countries seemed to have pennies. If they did, I didn't encounter them while I was there. The lowest denomination I saw in Australia was a 5-cent coin, and the lowest I saw in New Zealand was a 10-cent coin.

I remarked while I was over there at how much sense this made to me and wished that the same would happen in the United States, because I feel like pennies are worthless. I'm glad to see someone experimenting with it in the US.

follower2• 16 years ago

In New Zealand the smallest coin is a ten cent coin:

  http://en.wikipedia.org/wiki/Coins_of_the_New_Zealand_dollar#Current_coinage

wazoox• 16 years ago

In Finland maybe, but in France, Italy, Spain, Belgium at least the euro 1 and 2 cents are commonly used.

atsaloli2• 16 years ago

Australia doesn't even HAVE a one cent coin any more; smallest coin is 5 cents. This is inflation at work, my friends. This is not a good thing.

brianobush• 16 years ago

(from the wikipedia entry on inflation) most mainstream economists favor a low steady rate of inflation.

Hummel, Jeffrey Rogers. "Death and Taxes, Including Inflation: the Public versus Economists" (January 2007).[1] p.56

atsaloli2• 16 years ago

Thank you for that reference, brianobush.

Unfortunately the consumer price index in the US demonstrates another kind of inflation altogether:

http://goldnews.bullionvault.com/inflation_truth_federal_res...

yock2• 16 years ago

Why are there so many people so obsessed with this? It's a base unit of measurement, and the problem is one of perception more than anything else. A single penny is viewed as worthless, which is a problem of currency inflation, not of the penny itself.

How long will we be rounding everything to the nearest nickel before that too becomes so laborious that we move on to the dime? Quarter? Whole dollar? Where does it stop?

Instead of applying arbitrary rounding rules to currency transactions, we should enact policies that return value to that currency.

mikecarlucci• 16 years ago

Part of the solution will be the inevitable shift away from cash entirely. Paying electronically it doesn't matter if the price is $0.42 or $13.37. Just ceasing production of coins and bills would probably save a tidy sum. The problem of course is universal infrastructure.

The half penny was eliminated too when physical money was the only option. It's just a tough bandage to pull.

yock2• 16 years ago

No move can be made away from hard currency without preserving a means for private, anonymous transactions.

marcinw• 16 years ago

If you're going to round my exact change down, then don't complain if I'm a couple cents short.

smackfu• 16 years ago

I just pay for my $3 order with a credit card. They don't even need a signature if it's under $10.

Electronic commerce is what will really kill the penny -- because no one will care anymore.

tzs• 16 years ago

The cynic in me suspects that before doing this they looked at their receipt records and determined that in most cases this new rounding method would favor the store, and if customers accept this, it will spread to the rest of their stores, and will result overall in a good bit of money gained by corporation.

One Dunkin’ Donuts store is taking a stand against the penny

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