People Are Easily Manipulated by Price of Goods... Except When They're Not
The old adage "you get what you pay for" is meant to be a warning against the folly of trying to save money by buying low-quality products. It's good advice. I'm reminded of a fellow I worked with many years ago who always bought the lowest-priced item whenever he had a choice.
One winter day when his car battery died, I drove him to a nearby auto parts shop. He bought the cheapest pair of jumper cables in the store. I'd never seen such flimsy cables. When we attached the cables from my car battery to his car battery, the insulation on one of the clamps slipped down and he received a painful (but harmless shock) when his hand came into contact with the bare wire. You might think this blunt lesson would have taught my friend about the cost of being a miser, but it didn't. He continued to buy the cheapest stuff he could find, and the quality of his life, in my opinion, was poorer because of it.
But there's a flip side to this adage that's equally foolish: Equating high price with high value. High quality goods cost more, but expensive goods aren't necessarily high quality. Unfortunately, people are conditioned to believe that high cost equals high value, at least some of the time. John Tierney's New York Times article "Calculating Consumer Happiness at Any Price" provides several examples of this kind of faulty logic. When people are told that a $10 bottle of wine costs $90, they'll report that it tastes better. When they're told a painkiller (actually a placebo) costs $2.50 per pill, they'll report less pain from electrical shocks than people who are given the same placebo but are told it costs ten cents. (I wonder what my cheap-jumper-cable-buying co-worker, who chose shocks over paying more for better quality products, would do in such a situation?)
However, this isn't always the case. Tierney's article goes on to detail an experiment that holds hope that people aren't always the simple-minded dupes that so many laboratory experiments make them out to be. Economists Ori Heffetz of Cornell University and Moses Shayo of the Hebrew University of Jerusalem ran a study in a real restaurant, manipulating menus to see how it might influence what people ordered. What they discovered was that people are less easily swayed by changes to the assigned value of menu items than lab-controlled experiments might suggest. Dr. Shayo said of the results, “Maybe when it comes to food, people do have reasonably stable preferences. Some people like shrimp and some don’t, even if it’s worth a lot of money.”
I'll drink (from a $10 bottle of wine) to that!
Working URL for NYT article: http://www.nytimes.com/2009/06/30/science/30tier.html
Posted by: Daniel Ashbrook | June 30, 2009 at 11:05 AM