Priceless: The Myth of Fair Value (and How to Take Advantage of It)
William Poundstone
Language: English
Pages: 352
ISBN: 0809078813
Format: PDF / Kindle (mobi) / ePub
Prada stores carry a few obscenely expensive items in order to boost sales for everything else (which look like bargains in comparison). People used to download music for free, then Steve Jobs convinced them to pay. How? By charging 99 cents. That price has a hypnotic effect: the profit margin of the 99 Cents Only store is twice that of Wal-Mart. Why do text messages cost money, while e-mails are free? Why do jars of peanut butter keep getting smaller in order to keep the price the "same"? The answer is simple: prices are a collective hallucination.
In Priceless, the bestselling author William Poundstone reveals the hidden psychology of value. In psychological experiments, people are unable to estimate "fair" prices accurately and are strongly influenced by the unconscious, irrational, and politically incorrect. It hasn't taken long for marketers to apply these findings. "Price consultants" advise retailers on how to convince consumers to pay more for less, and negotiation coaches offer similar advice for businesspeople cutting deals. The new psychology of price dictates the design of price tags, menus, rebates, "sale" ads, cell phone plans, supermarket aisles, real estate offers, wage packages, tort demands, and corporate buyouts. Prices are the most pervasive hidden persuaders of all. Rooted in the emerging field of behavioral decision theory, Priceless should prove indispensable to anyone who negotiates.
Ibid., 109. 21. Attacking Heuristics “I don’t know how much [Amos] anticipated”: Barbara Tversky interview, July 8, 2008. “I am not really interested in the psychology of stupidity”: Kahneman, Nobel autobiography, nobelprize.org/nobel_prizes/economics/laureates/2002/kahneman=autobio.html. For more reactions from philosophers (and others) see Cohen (1981) and comments. “Human incompetence”: Lopes 1991, 67. “evident exasperation”: Ibid., 76. “woefully muddled”: Ibid., 65, quoting an
experiments in a Las Vegas casino. They were big on doing experiments on real people in real settings. Would it be possible to use the Four Queens? Murphy, as major backer, had enough of the street in him to make it clear that this was an offer Goffstein could not refuse. Ward Edwards (1927–2005) spent his career asking difficult questions. Born in Morristown, New Jersey, he was the son of an economist and grew up hearing the table talk of his father’s colleagues. This instilled in him a
Pepsi as clients—but SKP does. In many industries, SKP advises half a dozen of the leading firms. Its current roster of clients includes Procter & Gamble, Nestlé, Microsoft, Intel, Texas Instruments, T-Mobile, Vodaphone, Nokia, Sony Ericsson, Honeywell, Thyssen-Krupp, Warner Music, Bertelsmann, Merck, Bayer, Johnson & Johnson, UBS, Barclays, HSBC, Goldman Sachs, Dow Jones, Hilton, British Airways, Lufthansa, Emirates Airlines, BMW, Mercedes, Volkswagen, Toyota, General Motors, Volvo, Caterpillar,
value. That would correspond to a $279 item being advertised as selling for $799 elsewhere. As Lichtenstein put it, “your idea of what an item should cost is influenced by advertised prices even when they are totally unbelievable.” For seven years, Eothen was notorious. Montauk cocktail parties and open houses were abuzz with talk of the $50 million white elephant. When Morrissey cut the price to $40 million, the $50 million price did not vanish into thin air. You can bet that every buyer was
with Suzy Wetlaufer, forty-two, with the looks and bearing of a model. Wetlaufer was editor of the Harvard Business Review. The magazine had asked to do a profile of Jack and he consented. Welch had no idea that he was walking into “the most expensive tryst in history.” Two teams of divorce attorneys were soon bickering over quite different estimates of the Welches’ net worth. Jane’s lawyers put it at $800 million (and wanted half ); Jack’s team said it was only $456 million (and were offering