Consumer Math
Like any other denomination of currency, the penny is perceived as a physical data value representation. As such, besides the physical value accrued to a penny, the modern electronic system of the transaction often considers the penny value. Despite the low penny value perceived in a single transaction, pennies serve a core role in the national and international monetary system. Consequently, instead of determining the value of the penny based on its purchasing power, it should be viewed as a transaction unit. While a pennys value accrued to one item is minimal, the aggregate value accrued to rounding off to the nearest nickel would lead to tremendous losses for the customer and gains for merchants (Pavlek et al., 2019). With every transaction, customers are charged a tax that contributes to the national revenue; as such, the government is responsible for securing the welfare of the consumers by continuing the production of pennies.
Consumers price evaluations are greatly influenced by the left-digit bias, where the perceived value of items that end with .99 are perceived to be less than those ending with .00. This perception affects price evaluations, shapes the willingness of customers to pay, and drives demand. This is because the lees that dollar value cognitively is perceived to be cheaper compared to a whole dollar value (Sokolova et al., 2020). While this difference is considered trivial for purchasing a single item, consumers often buy multiple items throughout their lives. As such, abolishing the penny would have a chaotic impact on the economy since it would imply the failure to recognize the value accrued to the penny. Further, it would debilitate the customers purchasing power and increase the income generated without merchants delivering value. Therefore, despite the higher cost incurred by the government, pennies are a representation of value that cannot be overlooked.
References
Pavlek, B., Winters, J., & Morin, O. (2019). Ancient coin designs encoded increasing amounts of economic information over centuries.Journal Of Anthropological Archaeology,56, 101103. https://doi.org/10.1016/j.jaa.2019.101103
Sokolova, T., Seenivasan, S., & Thomas, M. (2020). The Left-Digit Bias: When and Why Are Consumers Penny Wise and Pound Foolish?.Journal Of Marketing Research,57(4), 771-788. https://doi.org/10.1177/0022243720932532
