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If I'm willing to pay $40 for a coffee maker, it doesn't really matter what other people are paying. My value judgment of the coffee maker is purely internal: E

If I'm willing to pay $40 for a coffee maker, it doesn't really matter what other people are paying. My value judgment of the coffee maker is purely internal: Either it's worth it or it isn't. As long as the device performs to specification, I haven't actually been defrauded. I did have some greasy marketer or 'data scientist' grope around in my lizard brain, but that's to be expected. There's nothing wrong with running a search to see if anyone has a cheaper one, but this should be done after you've decided its objective value to you and not before. Same reason you don't buy a house by comparing its list price to similar local sales, or trending house prices. That kind of thinking is how people go broke. Here's some other strings marketers like to pull: * Only 1 left in stock * Only 12 hours left on this sale(possibly with a countdown timer visibly ticking down) * $300 cheaper than our premium model, but has most of the features. What a great deal! * 5% of your purchase goes towards starving children in Africa * Buy it in a bundle for a discount. You know who actually routinely has clever marketing, though? Coca-cola. When they did their campaign printing common names on all the bottles, I bought several of them for people I knew. I thought that was a nice touch. No false urgency or manipulation.

ars 11y ago
> If I'm willing to pay $40 for a coffee maker, it doesn't really matter what other people are paying. You don't always know what a reasonable price for the thing is. Telling you "you can afford it", or "it's worth it", or things like that is a very common way for people to overcharge you and make you feel good about it. I always run the other way when someone asks me what I think something is worth, or if I can afford it. So yes, it does matter what other people are paying, if you want to make the most of your money.
- derefr 11y ago
  Why does it matter what a reasonable price is? I mean, it matters in the downward direction, in terms of trying to capture back value that would be captured away from you if you just stated, bald-faced, what you valued the item at. But in the upward direction, it's actually better to not know the price other people are paying, I think, because anchoring effects can be shockingly strong. Consider that a night at the movies can cost more than a year's subscription to some streaming services. If you didn't know the price of movie tickets—what other people are willing to pay—would you consider them to give you as much utility as a year's movie streaming? If not, then the anchoring effect is screwing up your sense of how much you're willing to pay. Try this, sometime: decide an actual dollar value for how much enjoyment you would extract from taking up some fancy hobby (say, archery) without knowing how much the equipment costs. Then look up the equipment cost. The proper response should be to balk if the cost is higher than your estimated value. But what people almost universally do instead is to convince themselves that there is at least as much value in the item as there is cost. Some video games cost $2. Some cost $70. The graphics might be fancier on the $70 one, but the amount of time you'll actually spend engaged with the game is likely completely uncorrelated to the price. You buy the $70 game because you assume it's worth it. You buy the $2 game because you also assume it's worth it. If you didn't know the prices others paid, you'd likely be completely unable to guess which was which.
throweway 11y ago
> Same reason you don't buy a house by comparing its list price to similar local sales, or trending house prices Except you should do that otherwise you could overpay and in some cases be refused finance as a result!
- seanp2k2 11y ago
  Also, they absolutely appraise house prices by those metrics, along with square footage. A house selling for less in a neighborhood will also cause the appraisal value of other similar houses to drop. People get upset about that even if they have no intent to sell their home.
  - devonkim 11y ago
    The appraisal value is absolutely important when using lenders. My house appraised for 25% less between two local appraisers within 5 months of each other - the higher was during low housing movement. This forced me to bring in even more money and nearly caused the seller to drop and wait for a cash buyer (common in high retiree areas). That appraisal value is not terribly important to retirees though because they tend to buy for keeps instead of caring about resale value as much as, say, a first time home buyer would.
ryporter 11y ago
I (and I suspect most others) cannot accurately value a product without points of comparison. We rely on the market to conduct the price discovery process. If thousands of people have bought an item on Amazon, and it has many great reviews (including some that call it a good value for the money, and none that strike me as fake), then I judge that the price is a good one. There's nothing morally wrong with introducing a new product with a high list price and a heavily discounted sale price, but I'm probably not going to purchase it until I see whether the market will bear that price.
- MichaelBurge 11y ago
  There's a couple techniques for determining the intrinsic value of something to you: * Look at the direct labor cost: My last W-2 job was something like $45/hour after taxes. I'd probably work an extra hour to get a coffee maker that'll last about 3 years. This doesn't really help price anything below $1000 or so, since the prices tend to meld together. But I definitely want to quit work 2 weeks earlier, so the entire bottom floor of my house is devoid of furniture(which might sum to $3000). * Look at opportunity cost: I can live on about $800/month with bills/housing/etc. So $40 is 1.5 days of runway on savings. Would I rather have an extra 1.5 days of time to launch my next project, or would I rather have a coffee maker? It's possible the coffee maker would pay off. * Look at ROI: Someone bought me a Keurig as a gift, and the K-cups that it uses are ridiculously expensive(something like $1/cup). Buying a coffee maker that uses bulk grounds is cheaper. You can make a spreadsheet comparing the 'status quo', 'buy new coffee maker', and 'attempt to find or make cheaper K-cups' options. * Look at risk mitigation: Suppose I lose money hiring an unreliable freelancer. Maybe I've lost $1000, and I'm considering buying a Dale Carnegie book for $20. I think the techniques in that book can turn at least 1 in 50 freelancers around, so it pays for itself in expected value on the very next freelancer I hire. Or maybe my site went down the other week and I lost $15000 and I'm considering spending $500 in dev time to go bug-hunting in that area: It pays for itself if I estimate at least 3% probability of finding another bug of similar magnitude. Similarly, I wanted a 3rd new monitor to expand on my 8-year old dual-monitors. I estimated its value at $500, and ended up buying whatever was the best quality monitor I could get for $500. I think it was listed as half-off on Newegg. It's worth paying someone $20 every month or so to clean the grass around my sidewalk, if you look at what the city would fine you if you don't(risk mitigation) and looking at wage costs. A quart of ice cream is probably worth $20 to me, since I rarely eat it except on somewhat special occasions. I usually pay $4. Actually, I'm having trouble thinking of a single thing that I can't determine an intrinsic value for that's worth buying, and which I would need to defer to the market to decide on a price.
kartickv 11y ago
I'm not sure exactly what you're saying, but it does matter if others are paying $20 for the same or similar coffee maker — it tells me I've been taken advantage of, wasting money that could have been used in better ways.

ars 11y ago

> If I'm willing to pay $40 for a coffee maker, it doesn't really matter what other people are paying. You don't always know what a reasonable price for the thing is. Telling you "you can afford it", or "it's worth it", or things like that is a very common way for people to overcharge you and make you feel good about it. I always run the other way when someone asks me what I think something is worth, or if I can afford it. So yes, it does matter what other people are paying, if you want to make the most of your money.

derefr 11y ago
Why does it matter what a reasonable price is? I mean, it matters in the downward direction, in terms of trying to capture back value that would be captured away from you if you just stated, bald-faced, what you valued the item at. But in the upward direction, it's actually better to not know the price other people are paying, I think, because anchoring effects can be shockingly strong. Consider that a night at the movies can cost more than a year's subscription to some streaming services. If you didn't know the price of movie tickets—what other people are willing to pay—would you consider them to give you as much utility as a year's movie streaming? If not, then the anchoring effect is screwing up your sense of how much you're willing to pay. Try this, sometime: decide an actual dollar value for how much enjoyment you would extract from taking up some fancy hobby (say, archery) without knowing how much the equipment costs. Then look up the equipment cost. The proper response should be to balk if the cost is higher than your estimated value. But what people almost universally do instead is to convince themselves that there is at least as much value in the item as there is cost. Some video games cost $2. Some cost $70. The graphics might be fancier on the $70 one, but the amount of time you'll actually spend engaged with the game is likely completely uncorrelated to the price. You buy the $70 game because you assume it's worth it. You buy the $2 game because you also assume it's worth it. If you didn't know the prices others paid, you'd likely be completely unable to guess which was which.

throweway 11y ago

> Same reason you don't buy a house by comparing its list price to similar local sales, or trending house prices Except you should do that otherwise you could overpay and in some cases be refused finance as a result!

seanp2k2 11y ago
Also, they absolutely appraise house prices by those metrics, along with square footage. A house selling for less in a neighborhood will also cause the appraisal value of other similar houses to drop. People get upset about that even if they have no intent to sell their home.
- devonkim 11y ago
  The appraisal value is absolutely important when using lenders. My house appraised for 25% less between two local appraisers within 5 months of each other - the higher was during low housing movement. This forced me to bring in even more money and nearly caused the seller to drop and wait for a cash buyer (common in high retiree areas). That appraisal value is not terribly important to retirees though because they tend to buy for keeps instead of caring about resale value as much as, say, a first time home buyer would.

ryporter 11y ago

I (and I suspect most others) cannot accurately value a product without points of comparison. We rely on the market to conduct the price discovery process. If thousands of people have bought an item on Amazon, and it has many great reviews (including some that call it a good value for the money, and none that strike me as fake), then I judge that the price is a good one. There's nothing morally wrong with introducing a new product with a high list price and a heavily discounted sale price, but I'm probably not going to purchase it until I see whether the market will bear that price.

MichaelBurge 11y ago
There's a couple techniques for determining the intrinsic value of something to you: * Look at the direct labor cost: My last W-2 job was something like $45/hour after taxes. I'd probably work an extra hour to get a coffee maker that'll last about 3 years. This doesn't really help price anything below $1000 or so, since the prices tend to meld together. But I definitely want to quit work 2 weeks earlier, so the entire bottom floor of my house is devoid of furniture(which might sum to $3000). * Look at opportunity cost: I can live on about $800/month with bills/housing/etc. So $40 is 1.5 days of runway on savings. Would I rather have an extra 1.5 days of time to launch my next project, or would I rather have a coffee maker? It's possible the coffee maker would pay off. * Look at ROI: Someone bought me a Keurig as a gift, and the K-cups that it uses are ridiculously expensive(something like $1/cup). Buying a coffee maker that uses bulk grounds is cheaper. You can make a spreadsheet comparing the 'status quo', 'buy new coffee maker', and 'attempt to find or make cheaper K-cups' options. * Look at risk mitigation: Suppose I lose money hiring an unreliable freelancer. Maybe I've lost $1000, and I'm considering buying a Dale Carnegie book for $20. I think the techniques in that book can turn at least 1 in 50 freelancers around, so it pays for itself in expected value on the very next freelancer I hire. Or maybe my site went down the other week and I lost $15000 and I'm considering spending $500 in dev time to go bug-hunting in that area: It pays for itself if I estimate at least 3% probability of finding another bug of similar magnitude. Similarly, I wanted a 3rd new monitor to expand on my 8-year old dual-monitors. I estimated its value at $500, and ended up buying whatever was the best quality monitor I could get for $500. I think it was listed as half-off on Newegg. It's worth paying someone $20 every month or so to clean the grass around my sidewalk, if you look at what the city would fine you if you don't(risk mitigation) and looking at wage costs. A quart of ice cream is probably worth $20 to me, since I rarely eat it except on somewhat special occasions. I usually pay $4. Actually, I'm having trouble thinking of a single thing that I can't determine an intrinsic value for that's worth buying, and which I would need to defer to the market to decide on a price.

kartickv 11y ago

I'm not sure exactly what you're saying, but it does matter if others are paying $20 for the same or similar coffee maker — it tells me I've been taken advantage of, wasting money that could have been used in better ways.