Absolutely. There's a lot of evidence in the retail industry to show that it does. People love to think they are getting a bargain!
Also, with prices like £4.99, the brain registers the £4 rather than the fact it is one penny less than £5, so it feels like a lot cheaper than £5. If you stop to think about it, obviously it isn't but most purchasing decisions are not thought about carefully.
Definitely especially when the item is priced around $5 we tend to abbreviate and an item that is $4.99 is often unintentionally perceived as being a $4 item as it has not yet reached the next whole dollar
I think most of us now understand the psychology behind this ploy as we have the "round up" system in Australia, although buying in bulk rather than a single item would save a bit, ie 1 = $1 (rounded up), 5 = $4.95, but then again who could be bothered. I think subconsciously though we still think it is cheaper at 99c rather than $1.