Priceless: The Myth of Fair Value (and How to Take Advantage of It) (44 page)

170
“What You Get”:
www.buythebullet.com/whatyouget.php and www.buythebullet.com/howitworks.php
.

30. Who’s Afraid of the Phone Bill?

172
Justine Ezarik’s August bill:
www.youtube.com/watch?v=UdULhkh6yeA
.

173
“With more than 3 million customers every year”: Simon 2008, 213, says that ticket prices were $5.50 before and increased to an average of $6.13 paid per ticket.

173
“Companies need to answer several questions”: Tacke and Luby (n.d.), 10–11.

174
$3.02 a minute: Lazarus 2009.

174
Netflix prices: See Netflix website,
www.netflix.com/Help?action=2&js
Enabled=false&faqtrkid=5&p_faqid=107&p_search_text—embership
.

174
Academic studies of causes of flat-rate bias: See Lambrecht and Skiera 2006.

175
the average ticket price paid went up 11 percent: Simon 2008, 213.

175
“Such improvements are not possible”: Ibid., 214.

31. Breakage and Slippage

176
About a third of all computer gear comes with rebates: Grow 2005.

176
Sperry and Hutchinson Green Stamps history: See
www.straightdope.com/columns/read/1940/whatever-happened-to-green-stamps
.

177
“The game is obviously”: Grow 2005.

177
“If you are using another fulfillment company”: Ibid.

177
“further research” . . . “special team”: Ibid.

177
a face value of $6 billion: Ibid.

178
“silver lining”: Thaler 1985, 202.

178
“Mr. A’s car was damaged”: Ibid., 204.

32. Paying for Air

179
$2,400 for air/vacuum machine: See
www.jmesales.com/item/19638/Super-Vac-Air.aspx
.

179
“long life and low maintenance”: Ibid.

179
Battery life test: “Which AA batteries last?” in
Consumer Reports
, Dec. 2008, 7.

181
A 2008 Consumer Electronics Association survey: Hutsko 2008.

181
an MMS was worth 3.5 times as much as a text message: Stadie, Engelmann, and Elvetico n.d., 6.

181
Real cost of text messages: See
www.techcrunch.com/2008/07/01/atts-text-messages-cost-1310-per-megabyte/
.

181
the price . . . for text messages doubled: Stross 2008.

33. Cheap and Cheaper

182
“If I have 2,000 customers”: Meckes, Krohn, and Butscher n.d., 5.

182
Analysis of bargain airlines and price comparisons: Tacke and Schleusener n.d.

183
“Three or four years ago”: Sharkey 2009.

34. Mysteries of the 99-Cent Store

184
“I’ll tell you what brilliance in advertising is”: quoted in Arango 2009.

184
“The 79 cents sold better at 99”: Arango 2009.

184
99 Cents Only Store history: Chang 2008, Wikipedia entry at en.wikipedia.org/wiki/99_Cents_Only_Stores.

185
“The 99-cent promise”: Wilson 2008.

185
“The number 99 is a magic number”: Chang 2008.

185
Charm price history: Hower 1943, 52–53; Allen and Dare 2004, 699.

186
“They could be pricing at $3.99”: O’Dell interview, March 5, 2009.

186
Taco Bell, 50 Cent promotion: Zambito 2008.

188
“For many years, retail prices”: Ginzberg 1936, 296.

188
an unnamed large retailer: Ginzberg mentions that the total edition of the spring catalog was 6 million. A quick search on the Web found claims that the Sears Roebuck catalog had 11 million customers at its peak, but this fell off during the Depression. It had more customers than the rival Montgomery Ward catalog.

188
“as interesting as they were perplexing”: Ginzberg 1936, 296.

188
“The vice-president in charge of merchandising”: Ibid.

188
boost sales by an average of 24 percent: Liang and Kanetkar 2006, 378.

189
40 percent, twice that of Wal-Mart: Coffey 2002.

189
Star Wars
underwear deal: Ibid.

190
Nordstrom’s doesn’t use charm prices: See en.wikipedia.org/wiki/Psychological_pricing.

190
Eddie Bauer and J. Crew charm prices: Anderson and Simester 2003, 106 (note).

190
Costco uses 97-cent endings:
Consumer Reports,
May 2007. See
www.consumer reports.org/cro/money/shopping/
where-to-buy/warehouse-clubs-5-07/overview/0507_ware_ov.htm
.

35. Meaningless Zeros

193
Hershey Kisses, Lindt truffles experiment: Ariely 2008, 51–54.

36. Reality Constraint

196
“Negotiation at the time was relatively moribund”: Neale interview, June 3, 2008.

196
“The argument that we were making”: Ibid.

196
“Maggie and I used to have lunch”: Northcraft interview, May 30, 2008.

196
“We both had the experience”: Ibid.

197
“There’s really two ways of looking at this”: Ibid.

198
“Science is often portrayed”: Northcraft, personal e-mail, May 28, 2008.

199
“I think there are a lot of areas”: Northcraft interview, May 30, 2008.

199
“For these judgments”: Northcraft and Neale 1987, 96.

199
“It remains an open question”: Ibid., 95.

200
“zone of credibility”: Ibid., 84.

200
“obviously deviant”: Ibid., 88.

200
“At issue here is just how malleable”: Ibid., 95.

200
“Back in those days”: Neale interview, June 3, 2008.

200
over two hundred citations: Google Scholar listed 233 citations as of June 6, 2008.

200
“they absolutely rejected the findings”: Neale interview, June 3, 2008.

201
“I guess I would say there’s no shame”: Northcraft e-mail, May 30, 2008.

201
“One of the things we’ve worked on since”: Neale interview, June 3, 2008.

201
“The adage ‘You can always come down’ ”: Bailey 2008.

37. Selling Warhol’s Beach House

202
Paid $225,000 for 22 acres in 1971: Cotsalas 2006.

202
Warhol property turned nature preserve: Drumm 2007.

202
“hobbit huts”: Ibid.

202
“satin sheets and ice makers”: Ibid.

203
“If he would sell it for $25 million”: Ibid.

203
The sale price was $27.5 million: Cotsalas 2008.

203
“He seems to be a great guy”: Drumm 2007.

204
“This past summer”: Lichtenstein 2005, 358.

204
“ARPs work”: Ibid.

205
even when the reference price is . . . 2.86 times . . . market value: Urbany, Bearden, and Weilbaker 1988.

205
“your idea of what an item should cost”: Lichtenstein 2005, 357.

206
Worms in hamburgers rumor: Ibid., 359.

38. Groundhog Day

207
“Anchoring is not a curiosity”: Transcript of 2008 Edge Master Class,
www.edge.org/documents/archive/edge253.html
.

208
“We spend a lot of time talking to real folks”: Neale interview, June 3, 2008.

208
Van Leeuwenhoek’s findings: See
www.ucmp.berkeley.edu/history/leeuwenhoek.html
.

208
Groundhog Day
argument: Heukelom 2007c, 21–22. See also
www.mises.org/story/2289
.

209
Bargaining experiment: Ritov 1996.

212
“reanchor,” “Responding to an initial offer”: Bazerman and Neale 1992, 28.

39. Anchoring for Dummies

213
“A bat and a ball together”: Frederick 2005 and Oechssler, Roider, and Schmitz 2008.

40. Attention Deficit

215
“When I build something for somebody”: Blair 2005, 262.

215
Experiment with two groups of responders, preference reversal: Bazerman, White, Loewenstein 1995, 42.

216
“Automatic processes”: Camerer, Loewenstein, and Prelec 2005, 18 and 38.

216
The amygdala “sees” objects in peripheral vision: Ibid. 43.

216
“a big move covers a small move”: Macknik, King, Randi, et al. 2008.

217
Experiment with $400-$400 and $500-$700 payments: Bazerman, White, and Loewenstein 1995, 41.

218
“
Job A
: The offer is from Company 4”: Ibid.

218
“Together, our studies suggest”: Ibid., 42.

41. Drinking and Deal Making

219
12 percent of the retail alcohol market: Mosher 1983. Mosher says that businesses will spend “over $10 billion” on alcoholic beverages in 1982. Adjusted for inflation, this would be about $20 billion in 2008.

219
“ordinary and necessary”: quoted in Mosher 1983.

219
“A little bourbon”: Haughney 2008.

219
British team’s experiment: George, Rogers, and Duka 2005.

221
“How ’bout it, pal”: Southern 1960, 13.

221
alcohol myopia
: The term is coined in Steele and Josephs 1990. See also George, Rogers, and Duka 2005, 168.

42. An Octillion Doesn’t Buy What It Used To

223
Zimbabwe inflation: Associated Press, Jan. 18, 2009; Dixon 2008; Shaw 2008; Erwin 2009. Z $100 trillion bill: See blogs.usatoday.com/ondeadline/2009/01/zimbabwe-releas.html.

224
Pioneer of behavioral economics: Thaler 1997.

224
“The foisting of Psychology on Economics”: Fisher 1925, vi–vii.

224
“shaking out of the lunatic fringe”: “Irving Fisher,” Wikipedia, en.wikipedia.org/wiki/Irving_Fisher.

224
“Stock prices have reached”: Ibid.

225
(“Press stopper I and raise III”): Fisher 1892, 46.

225
“Fearing to be thought a profiteer”: Fisher 1928, 7; see also commentary in Thaler 1997.

226 Wine cost survey: Thaler 1999, 191.

227
“Which of the following best captures your feeling”: Shafir, Diamond, and Tversky 1997, 362, quoting a then unpublished article by Shafir and Thaler.

227
Wine cost survey responses: Thaler 1999, 191.

227
“Common discourse and newspaper reports”: Shafir, Diamond, and Tversky 1997, 344.

228
When prompted by the phrase “in economic terms”: Ibid., 352.

229
“California’s run-up in housing prices”: Connell, Smith, and Watanabe 2008.