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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

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.

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.