The Myth of Fair Value (and How to Take Advantage of It)
Hill and Wang, Hardcover, 9780809094691, 352pp.
Publication Date: January 5, 2010
Prada stores carry a few obscenely expensive items in order to boost sales for everything else (which look like bargains in comparison). People used to download music for free, then Steve Jobs convinced them to pay. How? By charging 99 cents. That price has a hypnotic effect: the profit margin of the 99 Cents Only store is twice that of Wal-Mart. Why do text messages cost money, while e-mails are free? Why do jars of peanut butter keep getting smaller in order to keep the price the “same”? The answer is simple: prices are a collective hallucination. In Priceless, the bestselling author William Poundstone reveals the hidden psychology of value. In psychological experiments, people are unable to estimate “fair” prices accurately and are strongly influenced by the unconscious, irrational, and politically incorrect. It hasn’t taken long for marketers to apply these findings. “Price consultants” advise retailers on how to convince consumers to pay more for less, and negotiation coaches offer similar advice for businesspeople cutting deals. The new psychology of price dictates the design of price tags, menus, rebates, “sale” ads, cell phone plans, supermarket aisles, real estate offers, wage packages, tort demands, and corporate buyouts. Prices are the most pervasive hidden persuaders of all. Rooted in the emerging field of behavioral decision theory, Priceless should prove indispensable to anyone who negotiates.
William Poundstone is the author of two previous Hill and Wang books: Fortune’s Formula and Gaming the Vote.
“Priceless is an instructive and entertaining romp through the hits of recent research on decision making, which will leave you amused, smarter, and wondering about what money and prices really mean.” —Daniel Kahneman, professor emeritus, Princeton University, and winner of the 2002 Nobel Prize in Economics “A powerful argument that should be a wake-up call to everyone who still subscribes to the old model of economics.” —Dan Ariely, author of Predictably Irrational: The Hidden Forces that Shape Our Decisions “Poundstone has managed to write a book that is fun to read and yet well-researched and substantive. Without a minute of suffering the reader gets to know nearly all the key contributors to the science of decision making. Recommended for anyone who has to make decisions.” —Richard H. Thaler, coauthor (with Cass R. Sunstein) of Nudge: Improving Decisions on Health, Wealth and Happiness “The psychology of prices is, to an extent, the psychology of life, and thus the lessons of Priceless are indeed life lessons. Poundstone's lively descriptions of the irrational quirks that characterize our behavior are engaging and enlightening. Take it with you when you're thinking of buying (or selling) something. It might save you a bundle.” —John Allen Paulos, author of Innumeracy: Mathematical Illiteracy and Its Consequences and Irreligion: A Mathematician Explains Why the Arguments for God Just Don't Add Up “If you can get this book for under $100, grab it! After you read it, you will better understand why the price you paid felt like a bargain.” —Max Bazerman, professor of business administration, Harvard Business School, and coauthor of Judgment in Managerial Decision Making “Much of behavioral economics . . . has focused on the seemingly crazy ways in which people and prices interact. In his new book Priceless, William Poundstone offers a thoroughly accessible and enjoyable tour of this research . . . Poundstone is an engaging intellectual historian who traces the development of behavioral economics from its roots in the 1960s discipline called psychophysics, an offshoot of psychology . . . It was more than century ago that Oscar Wilde famously observed that ‘people know the price of everything and the value of nothing.’ In Priceless, we now have the proof.” —Steven Pearlstine, Washington Post “Pricing is a richer subject than you might imagine. The smile that creeps onto your face when a shameless marketing gambit reminds you of something you read in Poundstone's book? Priceless.” —Peter Coy, Business Week “[Poundstone] makes complicated economic and psychological concepts palatable by using a numble, colloquial style in refreshingly short chapters . . . Dozens of fascinating topics are explored . . . At the end you will be left wondering what money and prices really mean—the dizzying quirky irrational sort of wonder that Alice found in ‘Wonderland.’” —Roger Miller, The Denver Post
“Bright analysis of the psychology of pricing . . . readable and revealing.” –Kirkus Reviews
What mental tricks do retailers employ to push products? William Poundstone, author of Priceless: The Myth of Fair Market Value (and How To Take Advantage of It), talks about the science of pricing and shares tips for savvy shopping. More at NPR.org
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