What A Nickel Is Worth

This Lydia DePillis post on DC's 5 cent bag tax is making the rounds:

It turns out that shoppers are now taking extreme measures to avoid paying that extra nickeleven schlepping groceries in their arms if they didn’t bring a backpack. The fee may drive people crazy, and the Journal may grumble about “bureaucracy,” but it actually seems to work: Stores report giving out half as many bags as they did before they started charging for them. And the reason seems to be rooted in how our brains operate...

A 2007 study (pdf)  by Dan Ariely, Kristina Shampanier, and Nina Maza discusses this cognitive bias in much greater detail:

When considering promotions at a low price, companies should experiment with further discounts to zero, which likely will have a surprisingly larger effect on demand. At least one piece of anecdotal evidence supports this claim. When Amazon introduced free shipping in some European countries, the price in France mistakenly was reduced not to zero but to one French franc, a negligible positive price (about 10¢). However, whereas the number of orders increased dramatically in the countries with free shipping, not much change occurred in France.