A brief statistical analysis of the Canadian penny phase-out: Are stores now charging more because of rounding?

On February 4th, 2013, the Royal Canada Mint stopped making pennies. This means that effectively soon, cash transactions will have to be rounded to the nearest 5 cents. Example: $1.01 will be $1.00, $1.03 will be $1.05, and $1.08 will be $1.10 (official Canadian guide to this: http://www.fin.gc.ca/1cent/index-eng.asp).  In principle, if the price of an item is random, then on average, all transactions should even out: sometimes the rounding will be to your advantage, sometimes it will be to the store’s. However, prices are not random, as walking through a supermarket will tell you. Very often, prices end in 99 cents. In the worse case scenario then, if you ever only make one transaction at a time, and buy items that end in 99 cents, you will be charged a penny extra each time (if you buy some food item that is not taxed). Generally, this would not be much of a problem, unless there is a systematic statistical bias overall. That would mean that while the rounding procedure is meant to be a “fair and transparent matter”, people would end up paying more inadvertently.

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