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> before the price hikes you weren't willing to pay a dollar more for name brand (or premium drugs etc), but after the price hike you are? Imagine that 10 norm
by TezlaOil 8y ago
> before the price hikes you weren't willing to pay a dollar more for name brand (or premium drugs etc), but after the price hike you are?
Imagine that 10 normal people and Bill Gates want to buy bottles of wine. Bill goes for a bottle of $6000 Richebourg Grand Cru, and the 10 normal people always go for Shitscreek Red, sold for $4. So about 9% of the buyers are willing to pay extra for the name brand.
After the Great Wine Tax Bill of 2021, the prices are both increased by a fixed per-bottle amount of $6000. So now the Richebourg costs $12000, and the Shitscreek costs $6004. The 10 normal people migrate to beer, and Bill Gates still buys Richebourg. So about 100% of the buyers are willing to pay extra for the name brand.
- srtjstjsj 8y agoThat's not what the effect is about. The effect is about normal people becoming more likely to choose the expensive one because it appears to be "less 'more expensive'", because they judge ratios instead of absolute values. A similar irrationality is when people will do an extra hour's work to save $50 off a $100 purchase, but not to save $50 off a $10000 purchase.