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Priceless

The Myth of Fair Value (and How to Take Advantage of It)

William Poundstone
Hill and Wang, 2010
First Edition: 2010
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Editorial Rating

8

Recommendation

You might think you’re a tuned-in consumer and immune to the tricks and gimmicks marketers deploy to get you to buy their products for top prices. But beware, says prolific business author William Poundstone: Your brain is keeping you from making rational cost decisions. This tour of the latest information on pricing techniques is well worth its price tag. Heed his information on the behavioral science that explains the flaws in the heuristics (rules of thumb) that keep shoppers and negotiators from being completely rational, and therefore, completely sharp. getAbstract recommends Poundstone’s smart facts, research and insights to every consumer or business manager who wants the best deal at the right price and thus needs to know what the right price is.

Summary

Higher Prices Come in Smaller Packages

If you’re like most people, you’re pretty confident that you know what something ought to cost, whether it’s a car or a jar of peanut butter. But consider this: Did you know that Skippy’s peanut butter jar now holds only 16.3 ounces, down from its previous 18 ounces? Or that Kellogg’s breakfast cereals now come in thinner – not shorter or more narrow – boxes than ever before? Or that Dial and Zest soap bars have slimmed down and that Puffs facial tissues are smaller, even though their container never changed size?

You may not have noticed these incremental changes, but you’re paying the same prices for these products that you paid before they got smaller. Manufacturers routinely raise prices by shrinking products, and most consumers never notice. Buyers really don’t know what something should cost, so – demonstrating what psychologists call “coherent arbitrariness” – they take their cues from “relative differences, not absolute prices.” You can’t tell how much something weighs, but you can discern whether one item is heavier than another. Similarly, your perceptions about cost, price and value depend on environmental and experiential...

About the Author

William Poundstone is the author of several business books including Fortune’s Formula and How Would You Move Mount Fuji?

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