Sometimes comedy has a lot of reality in it — this is one of these cases
What are the effects of high prices, packaging, and fancy descriptions? often they lead to higher evaluations and higher willingness to pay ….
Hi, I’m Dan Ariely. I do research in behavioral economics and try to describe it in plain language. These findings have enriched my life, and my hope is that they will do the same for you.
My latest book, The Upside of Irrationality, explores some positive and some negative ways that irrationality plays out in our lives.
When we make decisions we think we're in control. But are we?
Excerpts and Videos
Reminds me of this article from the Harvard Business Review, on “reverse pricing wars” in China, where businesses compete to sell expensive products.
Reminds me a Pen an Teller video I saw in YouAreNotSoSmart.com
This is so true.
However, I think it only applies to a certain demographic/culture/society than everyone. E.g. people with a larger disposable income and believe they are “educated.”
aside from the fact its a funny clip – its too easy to be cynical about this
brand culture (of which this is an extreme version) is a manifestation of a fundamental human need, that of expressing one’s identity in the context of a tribe – this isn’t irrational – its completely understandable !
at one point religion of course catered to this need – now brand managers are the priests of our western societies
these extremes, seemingly bizare contradictions will change over time, as the mainstream wakes up to more progressive values – for instance – an interesting clip from yesterday about collaborative consumption – here http://www.youtube.com/watch?v=4Xj0kKPiKPI&feature=player_embedded – speaks to the need to be part of a consumer / brand movement – but with possibly more productive, less environmentally (and psychologically) damaging effects
For the upcoming school year, 2011-2012, I’m doing a rundraiser for Rachel’s Challenge. My group bought rubber wristbands at .65 cents each. What price should we sell them at? I want to sell them at $2 because we compete with many organizations selling the same product. Also, 50% of our community is low ses. But I know we should sell the wristbands at $5 because donors will confuse price with quality. If my goal is to earn as much as possible, then I’ll sell a piece of rubber for five times the price. Go figure.
Think about this next time you pay your kid’s college tuition.
Hoo Kang,
I agree only some people will pay stupid prices for designer groceries. But I also think most everyone will pay stupid prices for some product. The so-called, stereotyped “educated” or “elite” might pay for these stupid groceries. Broke students and younger people might pay stupid prices for designer clothes and phones. Lower class are targeted for ridiculous interest rates on rent-to-own products or payday loans
I bet she drove a Prius to the Botique.
The video sketch got me thinking about the attentiveness of the sales staff in, say, vintage wine shop. For example, the employees in the local state store tend to be rather unhelpful and almost surly, as if customers’ presence is a bother. Would test subjects tend to signal their status by purchasing higher priced wines more or less frequently than in a setting where the staff is knowledgeble, friendly and helpful? The working hypothesis is that the surly staff are losing money. I make a point to shop at the state store, knowing I will spend less than if shopping were a pleasant experience! And wine is mostly just rotten grape juice anyway, so why overpay?
This comedy really proves a lot, and if you think outside of the box it’s only common sense and appealing to the human (i)rationality.
Several years ago my uncle decided to sell a young filly. She was a well-bred, healthy foal with good conformation. He just wanted to sell her quickly to a nice home so he offered her at an amazing bargain of $300. He had very few calls and only 2 people even showed up to check her out. After failing to sell her after a few weeks he raised her price to $1000. Many people called from the new ad. He sold her sight-unseen for $1000 in 2 days- and the new owner was thrilled with his good fortune.
Michelle that story is interesting but I find it a little hard to beleive, im not saying its not true though. I understand the point trying to be made but I don’t understand how so many people’s mind can work this way. When I go shopping I don’t look for the most expensive or fanciest named items I can find, and just becuase they are fancy doesn’t mean they are worth what they are priced.
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This clip reminds me more of people willing to pay a higher price for a higher brand clothing wear name. For example at dicks more people are willing to buy an under armour at 50$ when they can buy the same exact type of clothing that is made by new balance that is only $20. Because of the brand name and what other people may think about the clothing they wear, people are willing to spend an extra 30$ on a similar piece of clothing.