I thought this was common knowledge.

When you read $1.99, many people subconscious only read $1. If you read an ad for Some Product(TM) for $2, you would think, "I saw it at OtherStore(TM) for $1, so I'll buy it there," even though it was $1.99.

Time-tested subconscious advertising. They do it because it works. Enough people see it as $X instead of $(X+1) that they see a statistically significant rise in sales as a result.