CRITICAL THINKING - Cognitive Biases: Pricing Biases [HD]

Laurie Santos (Yale University) examines how people's economic choices tend to confuse price and value. She then describes how these so-called pricing biases compel us to incorrectly assume that higher priced goods will often work and taste better.
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[@jamesfreedom123]

I run a home cleaning company and I have found back when I charged lower prices, my customers didn't appreciate it as much as other customers whom I charged more for even though I didn't do anything differently with the customer that paid more. Overall the customer that paid more had less complaints, and was less nitpicky compared to the customer who paid less. Interesting...

[@ThePeterDislikeShow]

Depends on culture. I do private tutoring. I find a lot of my clients who are Asian (I'm Asian) want to haggle the price and often throw in other "benefits" instead, this one kid I was tutoring, his mom wanted to hook me up with a girl. Most Asians would rather do that than pay cold hard cash.

[@PuzzL_]

I think this has to do with wanting something others can't have. We feel like we dominate more people by getting something we feel is exclusive.

[@themanfromtheeast2048]

a friend of mine is completely overpowered by the effect of Pricing Biases. one time we bought the same cell phone from the same origin however he decided to go and but it from a place we came a cross earlier only because it was more expensive there! he still believes that his cell phone is better than mine even though we took them apart and had the same manufacturer stamp on them!

[@grimreaper492]

Hahaha! I immedately picked the less expensive one! Does that make me biased in that I am more biased to pick the less expensive thing?

[@tim_sign]

it’s not just about the price. any indication of quality works like placebo. Imagine seeing a random painting of a street artist and the exact same one but after an expert says that this is the finest painting of VanGoh

[@Richard_Stroker]

Another common pricing bias is that folks will go to another store to save $10 off a $20 purchase but not $10 off a $1000 purchase, even though they are saving the exact same amount.

[@Richard_Stroker]

***** Sorry, I didn't quite understand what you said. Is the idea that if you get $10 off a $30 purchase you're saving 33%, but if you get $10 off a $1000 purchase you're only saving 1%? So therefore it makes sense to go to another store to save $10 off a $20 purchase but not $10 off a $1000 purchase?

[@djoakeydoakey1076]

Connor pretty much proved that bias exists! Does that bias have a name?

[@paradigmarson9586]

DJ OakeyDoakey, not sure, I think I came across it in Dan Ariely's book Predictably Irrational so probably

[@craigdaubbeats-rapinstrume9185]

Thats because if you have 1000 dollars to blow on something, you're not worried about the extra 10. Most of the people driving further to save 10 off 20 are most likely people living are low wage workers. The key is the ratio.

[@CecilDSouza]

@@Richard_Stroker : I agree even after reading the responses below. 10 bucks is 10 bucks saved. It is only when somebody evaluates the saving as a percentage, that one decides to ignore the saving. In fact, I myself would have done just that. But petty calculative people would always do what you mentioned.

[@glitchxero4687]

Lots of interesting things going on here. It seems almost like a variation on the placebo effect. Sadly, when it comes down to applying to jobs, the very same effect comes into play I'm sure. Two candidates might apply for the same position, with one having gone to, we'll say Harvard, while the other went to University. The Harvard graduate may not have necessarily received the superior education, or maybe the other candidate chose a minor which would provide them a marked advantage on the job, or just didn't pay as much attention, or a number of other such things. But the interviewer sees Harvard on the resume, versus University on the other and be influenced to choose the candidate who went to the more prestigious school. The human brain is so complex and interesting, and even after years and years of study, we're still only scratching at the surface of how it works and what its full capability is.

[@williamstanley4960]

The amazing thing is that most human beings actually believe our brains are part of their religion of evolution. Such stupidity! God's creation is, as you have said, very amazing! :o)

[@alperkures5268]

İt is something like plasebo effect. "I give more monet, it is more expensive so it is better." . Once you believe that more expensive product ise better, for the principle of plasebo effec, it will work better.

[@Master-Roshi]

And that's one of the tricks apple use to sell their shit.

[@ant7936]

Some people want/ need to be part of "a family". 😉😅

[@Femaiden]

if i won a prize and they gave me a choice between one or the other one and one was priced higher, i would take the higher priced one, not because i thought it was better, but because it's more expensive and therefore further out of my reach and this is likely my only opportunity to get a hold of that more expensive option and since it's technically "free" because i won it as a prize, i may as well take the one that costs the most money

[@paradigmarson9586]

3:10 Pour libations to Bia, will energise even more. Or to Pluto, make the money go further. In fact, pour libations to both Bia and Pluto and you'll multiply the gains. Of course, libations may have diminishing returns whereas the proportional loss of energy drink increases with each amount poured, so that's another variable to optimise for. A bit like in Skyrim when I use alchemy and nice soul gems to enhance enchant to enhance smithing to enhance weaponry to enchant to enhance alchemy until diminishing returns dictate I go on a noble quest. Results in massively OP weapons and everything crumbling before you with a flash of the blade. If only I could be bothered to apply this kind of optimization to real life somehow.

[@yeghor]

Titles are also labels like price labels.

[@khinsandi4947]

I guess there must be something really wrong with it. I never got interested in buying expensive stuff. I always purchase cheap stuff. Perhaps I am not rich enough

[@ace0swan]

That's great and all, but how do we counteract this? Knowing that of ourselves and other's, how do we change that perception?

[@MusicWizardry]

+ace0swan Through critical and logical thinking. Just knowing our mental biases makes it easier for us to pinpoint them when they occur in real life, and when we are aware of them we can think critically to see that there is no real relation between a thing's price and the thing's actual value.

[@0x5D]

2:15 YOUR JAW IS GROUNDED

[@ant7936]

I shared a bottle of wine at €200. It was good, but not appreciably better than my usual €20 wines. Above a certain base price, you're paying for reputation and labels, not flavour.

[@paradigmarson9586]

Of course, not having this bias could be a poor survival strategy. If your outward display of affect towards something falls below its inter-subjective value, you will come across as either foolish (if you bought it), ingrateful (if you were given it) or snobbish (if it's someone else's). Once again, rationality makes you disagreeable and agreeableness makes you irrational. So choose. Sigh, I'm resentful.

[@raverus2126]

This test would be interesting with sommeliers. See if people with training would be able to avoid the cognitive bias.

[@ThePeterDislikeShow]

Not me.

[@turkishdisco2]

But the price of goods in real life isn't always arbitrary, right? In general there is SOME connection between the cost of the raw materials, labour, etc, and the price tag. Obviously this can be abused by traders though.

[@MiauFrito]

Some Magic: The Gathering cards are sold for cents, others are sold for 50$

[@djoakeydoakey1076]

Clothes are pretty cheap to make. Sticking $100 label on jeans is arbitrarily assigned. However they got a sale on where they now sell it for $30. "OmG I just had an awesome deal, I pretty much made $60" The jeans cost $3 to make.

[@epicenterbasshd9636]

Im too smart I dont get fooled. (except maybe by AI) but i introspectively knew this without knowing any of the neuroscience behind it. I know how i am and what i want and like.

[@rg0057]

2:25 fMRI results in the last 15 years have been rendered invalid.

[@YamiAi]

explain

[@johnc646]

Cassette player?

[@JasonHoningford]

She does work at Yale...

[@karthik-qj4bw]

best example for this is buying an iphone

[@ekinulasyildiz2840]

👍

[@hughhefner9696]

This appears to determine that consumers are stupid. A pretty broad brush to paint people with and a silly generalization.

[@stxnw]

I bought 1 Mountain Dew for $2.20 although I could have have bought 2 Mountain Dew for $2.80. I am crazy.

[@djoakeydoakey1076]

Depends if you were going to drink mountain dew again. If you weren't then you saved yourself 60c

[@stxnw]

DJ OakeyDoakey I would totally drink the mountain dew again because it is my favourite drink.

[@casualsukr1533]

I picked 2 cheap wine bottles