Because prices in English are written out left-to-right, some research suggests that consumers primarily focus on the left-most digits of a price, thereby ignoring the least significant digits and proper rounding when making comparisons. 

Left-Digit Effect

A famous economic theory which proposes that customers facing uncertainty in decision-making base the value of an alternative on the gains or losses it provides relative to a reference point. The theory also incorporates evidence that consumers overvalue small deviations from a reference point. In the context of psychological pricing, a customer purchasing an item for $19.95 may feel that they are "gaining" a few extra cents from the obvious reference point of twenty dollars.

Prospect Theory

University of Minnesota - Twin Cities

A pricing strategy based on the theory that consumers perceive just-below prices (prices that are slightly below a round number, such as $19.99) as being lower than they actually are. 

Psychological Pricing

Hanson, Jon D. and Kysar, Douglas A., Taking Behavioralism Seriously: The Problem of Market Manipulation (1999). New York University Law Review, Vol. 74, p. 632, 1999, Harvard Public Law Working Paper No. 08-54, Available at SSRN: https://ssrn.com/abstract=1288182

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