Traditional pricing strategy is bunk, derived from economic theory. Most introductory marketing textbooks rely on the concept of the rational man to explain pricing. What we know from behavioural economics (see Dan Ariely, Predictably Irrational) is that consumers are anything but rational when making decisions.
In that spirit, here is an entertaining five-minute deconstruction of economics by Yoram Bauman, PhD:
Moral of the story? Don’t believe everything in your textbook.