Yeah sadly it does. And it works on products of all price ranges especially at critical price points, the lowest of which is $.99. But it works just as well at $199 ... or $189. A computer for $999 for some reason seems like a much better deal than the same computer for $1010 but in reality represents a difference of 1% which is still much less than the tax you're going to pay on the machine.

Check out the current king of selling "classy" computers and whatnot http://store.apple.com/us their site is crawling with this peculiar aspect of human psychology.