Atlantic Economic Journal

, Volume 46, Issue 2, pp 231–239 | Cite as

Eliminating the Penny in Canada: An Economic Analysis of Penny-Rounding on Grocery Items

  • Christina Cheung
Best Undergraduate Paper


In theory, the nearest-nickel rounding scheme renders no financial gains for anyone given that each final digit has the same probability of appearing. However, in practice, rounding may yield non-zero net effects as most store prices end with nine. In this paper, price data from representative Canadian grocery stores are used to assess whether the current rounding system imposes a monetary loss on firms or consumers. Specifically, I evaluate how one- to ten-item purchases and the six different Canadian provincial sales tax rates influence penny-rounding. The results show that penny-rounding financially benefits the firms at the expense of the consumers, imposing a net transfer of approximately $3.27 million CAD from consumers to grocery vendors every year. This amount averages to $157 of additional revenue for a typical grocery store per year.


penny rounding tax grocery 


D11 E47 C63 



I would like to express my deep gratitude to Professor Michael Vaney and Professor Jonathan Graves for their patient guidance, enthusiastic encouragement and critiques of this research.


  1. Allison, Carman (2014, January 14). For Grocery, Opportunity in Those Falling Trips. Retrieved from Accessed on June 7, 2017.
  2. Canada Revenue Agency (2007). Basic Groceries: GST/HST memorandum 4.3. Retrieved from Accessed on June 7, 2017.
  3. Chande, D., & Fisher, T. C. G. (2003). Have a Penny? Need a Penny? Eliminating the One-cent Coin from Circulation. Canadian Public Policy, 29(4), 511–517.CrossRefGoogle Scholar
  4. Government of Canada (2012). Economic Action Plan 2012. Retrieved June 7, 2017 from Accessed on June 7, 2017.
  5. Henry, C., Huynh, K. P., & Shen, R. (2015). 2013 Methods-of-Payment Survey results. Bank of Canada Discussion Paper, 2015(4).Google Scholar
  6. Lombra, R. (2001). Eliminating the Penny from the U.S. Coinage System: An Economic Analysis. Eastern Economic Journal, 27(4), 433–442.Google Scholar
  7. Retail Council of Canada (2013). The Structure of Retail in Canada Statistic. Retrieved June 7, 2017 from Accessed on June 7, 2017.
  8. Royal Canadian Mint (2013). Phasing out the Penny. Retrieved June 7, 2017 from Accessed on June 7, 2017.
  9. Statistics Canada (2013a). 2011 Census Population by Year. (CANSIM table 051–0001). Retrieved March 3, 2017 from Statistics Canada at Accessed on June 7, 2017.
  10. Statistics Canada (2013b). 2011 Census Private Households by Structural Type of Dwelling. (Catalogue number 98–313-XCB). Retrieved March 7, 2017 from Statistics Canada at Accessed on June 7, 2017.

Copyright information

© International Atlantic Economic Society 2018

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of British ColumbiaVancouverCanada

Personalised recommendations