Priceless
Examines how "price consultants" and retailers convince consumers to pay more for less, and how negotiation coaches offer similar advice for businesspeople cutting deals Prices are a collective hallucination. Here, 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. --From publisher description.
Stats for nerds
6recommend
7mentions
6people
2011–2022years
100% recommend
Mentions per year
What Hacker News says
- As for a book, Priceless by William Poundstone is an excellent read.
- I recommend the book "priceless." It goes through the psychology behind how you set a price. E.g. Why there are expensive wines on a wine list.
https://www.amazon.com/Priceless-Myth-Fair-Value-Advantage/d...
- Yeah I was going to say that the round pricing rule here is one of the more controversial ones. It's been proven time and time again that prices set at .99 will outsell their rounded competition by quite a way. It doesn't even have to be cents or pennies, something priced at $49 will outsell the one at $50.
I remember hearing of one study (I read this in Priceless by William Poundstone, good book), that compared the exact same product sold at $44, $39 and $34 through a split-tested mail order catalogue. Obviously, the $39 outsold the $44 as it was cheaper - but bizarrely, the $39 also outsold the $34.
There is a very weird power to the number 9 in pricing, I wouldn't underestimate it. If anyone wants further reading, I suggest googling "Charm Prices".
- Experiments using the Ultimatum Game have shown that people hate feeling like they're being ripped off, no matter how much we think they should just act rationally and understand the circumstances.
A great book on this is Priceless by William Poundstone.
- I'll put on a vote for Priceless by William Poundstone, too (I haven't started predictably irrational yet because someone else had it on loan :)
- I'm reading the book Priceless by William Poundstone which discusses the work of Kahneman and Tversky (among others) in great detail as it relates to the psychology of pricing (excellent read, btw).
This is O.T from what the article is saying but mildly O.T (meaning on-topic) and I'd love to hear HN's opinion on this.
One of the problems presented in Priceless is:
Would you rather $3,000 as a sure thing, or an 80% chance of $4,000 and a 20% chance of nothing
versus:
Would you rather a $3,000 loss as a sure thing, or an 80% chance of losing $4,000 and a 20% chance of losing nothing.
The erroneous path that most people take, in the eyes of these researchers, is that they set their base reference point at the sure thing, ie. they say "well the $3,000 is a sure thing so I can assume I have it".
If you do that, then your answers are different:
In the first instance you keep the $3,000 (because it becomes an 80% chance of winning $1,000 versus a 20% chance of losing $3,000).
In the second instance you go to court (because it's an 80% chance of losing $1,000 versus a 20% chance of winning $3,000).
However if you don't "rebase" your reference point, then you would make the same decision in both cases - that is you would take the 80% of $4,000 bet because it's "worth" $3,200.
As much as I realise what they're saying and they say it's statistically incorrect to do this, it really seems to me the most sensible way to make the decisions (which is, I guess, exactly what they're saying right? I'm human, ergo fallible to this kind of illusion).
The thing that kills me is this: if this is a one time thing, I'd rather be sure of the $3,000. If I'm buying and selling these bets all day, then sure I should take the $4,000 at 80% because even if I lose this round, the next time I take the bet will make up for it (ie. law of large numbers).
But what this problem doesn't address is how often I get this opportunity? Depending on my circumstances, $3,000 could be a life changing opportunity, ie. if I "win" $3,000 or $4,000, my circumstances are essentially the same so I should always go for the sure thing. If I lose $3,000 or $4,000 I'm equally screwed, so I should take the risk and try and win in court.
What am I missing?
