Priceless: The Myth of Fair Value (and How to Take Advantage of It) (43 page)

122
“We both expected the Machiguenga”: Siegfried 2004.

122
“That’s actually a tricky thing”: Camerer interview, Nov. 28, 2008.

122
44 percent average offer for Orma: Siegfried 2004.

123
a cultural X-ray: Ibid.

123
“Offering too much money”: Ibid.

123
“Adam Smith had this famous quote”: Camerer interview, Nov. 28, 2008. I’ve corrected Camerer’s extemporaneous (and near-exact) quotation from Smith’s
An Inquiry into the Nature and Causes of the Wealth of Nations
.

123
Chimp experiment: Jensen, Call, and Tomasello 2007.

124
“It thus would seem”: Ibid., 109.

21. Attacking Heuristics

125
“I don’t know how much [Amos] anticipated”: Barbara Tversky interview, July 8, 2008.

125
“I am not really interested in the psychology of stupidity”: Kahneman, Nobel autobiography, nobelprize.org/nobel_prizes/economics/laureates/2002/kahneman=auto bio.html. For more reactions from philosophers (and others) see Cohen (1981) and comments.

125
“Human incompetence”: Lopes 1991, 67.

125
“evident exasperation”: Ibid., 76.

126
“woefully muddled”: Ibid., 65, quoting an unidentified
Newsweek
article.

126
Gigerenzer’s critiques: Gigerenzer 1996.

126
“Gigerenzer was lying”: The speaker requested anonymity.

126
“costly”: Edwards 1954, 382.

127
“incoherence is more than skin deep”: Tversky and Kahneman 1983, 313.

127
a “lapse in judgment” to be “cured”: Camerer interview, Nov. 28, 2008.

127
Could not drive cars: Edwards 1975, 292.

127
“We frequently hear about human memory limitations”: Ibid., 292.

127
“Not only did he not embrace it”: Kahneman interview, August 30, 2008.

22. Deal or No Deal

129
Told few people; died three weeks after stopping going to office: Barbara Tversky interview, July 8, 2008.

130
nobody in their right mind would reject $10 or $20: Hoffman, McCabe, and Smith 1996, 292.

130
“Don’t be a maryter”: Ibid., 293 (footnote).

130
“almost appears to be designed”: Post, van den Assem, Baltussen, and Thaler 2008, 39.

131
Average prize value of $131,477.54: This is computed from the 26 prizes of $0.01, $1, $5, $10, $25, $50, $75, $100, $200, $300, $400, $500, $750, $1,000, $5,000, $10,000, $25,000, $50,000, $75,000, $100,000, $200,000, $300,000, $400,000, $500,000, $750,000, and $1 million.

132
76 percent for expected utility v. 85 percent for prospect theory: Post, van den Assem, Baltussen, and Thaler 2008, 27.

133
“as closely as possible in a classroom”: Ibid., 29.

133
“a person who has not made peace with his losses”: Tversky and Kahneman 1979, 287.

23. Prices on the Planet Algon

134
“Here an ordinary cup of drinking chocolate”: “Prices on the Planet Algon” sketch from Episode 35 of
Monty Python’s Flying Circus
(first aired 1972). See montypython.50webs.com/scripts/Series_3/76.htm.

134
“relatively inexpensive!”: Ibid.

135
“I was thinking about what I wanted”: Ariely interview, Jan. 9, 2009.

135
MIT auction experiment: Ariely, Loewenstein, and Prelec 2003.

136
Injury, pain of removing bandages: Ariely (n.d.), “Painful Lessons.”

136 reading the work of S. S. Stevens and others: Ariely interview, Jan. 9, 2009.

136
the price of everything and the value of nothing: Wilde used this phrase at least twice, in
The Picture of Dorian Gray
(1891) and
Lady Windermere’s Fan
(1892). In the latter, the quote is “What is a cynic? A man who knows the price of everything and the value of nothing.”

138
“Suppose that a subject”: Ariely, Loewenstein, and Prelec 2003, 77–78.

138
“Coherent Arbitrariness” paper: Ibid.

138
“In a few moments we are going to play”: Ibid., 80–81.

139
“pain threshold”: Ibid., 93.

24. The Free 72-Ounce Steak

143
FREE
72 OZ STEAK: See numerous photos on Flickr.com.

143
the signature dish of the Big Texan Steak Ranch: See Wikipedia entry for “The Big Texan Steak Ranch,” en.wikipedia.org/wiki/The_Big_Texan_Steak_Ranch.

143
“You don’t have to eat the fat”: See “Free 72 Oz. Steak” at
www.bigtexan.com
.

143
Simpsons
episode about 256-oz. steak: “Maximum Homerdrive” episode, originally aired 1999.

143
Original price $9.95, success rates: See “Free 72 Oz. Steak” at
www.bigtexan.com
.

144
Questions about meat consumption: Jacowitz and Kahneman 1995, 1163.

145
35 percent discount on a Nikon camera: Hermann Simon interview, Feb. 24, 2009.

145
“willingness to pay”: Simon 2008, 214.

146
“Imagine that you are about to purchase a jacket”: Tversky and Kahneman 1981, 459.

146
“Why are we more willing”: Thaler 1999, 186.

147
“What we’re saying”: Transcript of 2008 Edge Master Class,
www.edge.org/3rd_culture/thaler_sendhil08/thaler_sendhil_index.html
.

147
Professional Pricing Society, founded in 1984: See the PPS website, pricingsociety.com/Page4782.aspx.

147
Skeptical about the application of behavioral theory: See Simon 2008, 212, where he calls Thaler’s “mental accounting” model a “flop” for business applications.

147
Pack of Wrigley’s gum first item scanned: See Wikipedia entry for “Universal Product Code,” en.wikipedia.org/wiki/Universal_Product_Code.

147
Simon-Kucher & Partners history: Hermann Simon interview, Feb. 24, 2009.

148
“Indeed, retail pricing software”: Michaud n.d., 5.

148
“Pricing is a dangerous lever”: Tacke and Luby n.d., 9.

148
increases profit margins by about 2 percentage points: Simon 2008, 215.

148
1 to 4 percent: Michaud n.d., 5.

25. Price Check

149
“There’s an opportunity to make some margin back”: Rendon 2009.

149
Counterclockwise shoppers spend more: Keller 2007.

150
“If you want to get my attention”: CBC News 2000.

150
Beer riddle: Thaler 1983.

150
“investing in seemingly superfluous luxury”: Ibid., 231.

151
Duke University beer experiment: Huber and Puto 1983, 42.

152 Taste tests show beer drinkers can’t distinguish brands: Try Googling “beer blind taste test.” See for instance
www.strandbrewers.org/reviews/blind98.htm
.

153
“safe,” a “compromise” choice: Huber and Puto 1983, 38.

153
“less extreme, less expensive”: Ibid., 39.

26. Shilling for Prada

155
“You sold one thing”: Binkley 2007.

155
“with 322 black diamonds”:
Robb Report
, Dec. 30, 2008, and
www.hublot.com
.

156
Eva Longoria photographed with Coach python bag: See
www.purseblog.com/coach/eva-longoria-style-coach-python-miranda.html
.

156
“a mixture of anger and happiness”: Binkley 2007.

156
Breadmaker story: Shafir, Simonson, and Tversky 1993.

156
two commandments of manipulative retail: Simonson and Tversky 1992.

157
“Contrast effects are ubiquitous”: Ibid., 281–82.

157
“Luxury goods prices”: Von der Gathen and Gersch n.d.

158
Coach allots only one or two ultra-expensive bags: Binkley 2007.

158
over $1,700 per square foot: At its 2001 opening, Prada’s SoHo store was said to have cost $40 million for 23,000 square feet. See
www.galinsky.com/buildings/prada/index.htm
.

158
Prada website:
www.prada.com
. These figures are from the U.K. online store.

27. Menu Psych

159
“Daniel Boulud has a restaurant”: O’Dell interview, March 5, 2009.

159
Boulud hamburger, competitors: Wharton 2008; see also the db bistro moderne website at
www.danielnyc.com/dbbistro.html
.

160
“Places like Chili’s and Applebee’s”: Coomes 2005.

160
Stars
,
puzzles
: Hedden 1997.

160
“If you do this with three menu items”: Walkup 2006.

160
“By discounting the third item”: Ibid.

160
$13 for two scallops: Thaler 1999, 192 (footnote).

161
“The menu turns into a price list”: O’Dell interview, March 5, 2009.

162
Scrap the leader dots: Hedden 1997.

164
“We don’t want to take it off the menu”: Ibid.

28. The Price of a Super Bowl Ticket

165
Super Bowl ticket lottery, rules:
www.teamonetickets.com/tickets-101/super-bowl-tickets-lottery.html
.

165
“fair, reasonable price”: Krueger 2001.

165
“virtually screams for non-linear pricing structures”: Butscher, Luby, Weber, and Polonetsky n.d., 6.

165
Krueger survey: Krueger 2001.

166
Members of the Miley Cyrus Fan Club: AP news story, “Hannah Montana Tickets Fuel Lawsuit,” Nov. 13, 2007.

167
“Mommy get me tickets”: “Craig P” comment to ibid.

167 One women won an essay contest: “Mom Goes Too Far for Hannah Montana Tix,” ABC News, Dec. 31, 2007.

167
Springsteen and Ticketmaster: Phillips 2009.

167
“transaction utility”: Thaler 1983, 230.

168
MRI experiment: Sanfey, Rilling, Aaronson, et al. 2003.

168
“The fact that unfair offers activate”: Camerer, Loewenstein, and Prelec 2005, 48.

29. Don’t Wrap All the Christmas Presents in One Box

169
“How much would you pay for a knife like this?”: The original Ginsu commercial is on YouTube at
www.youtube.com/watch?v=abLB7aTmnE4
.

169
“At the end of the offer”: Gottlieb 2008.

169
$50 million sales, Berkshire Hathaway acquisition: Ibid.

169
“Don’t wrap all the Christmas presents”: Thaler 1985, 202.

169
Marketing Science
paper: Thaler 1985.

170
“Buy one Snuggie”:
www.getsnuggie.com/flare/next
.

170
“Normally 1 Bottle of Mighty Mendit”:
www.mightymendit.com/flare/next?tag=OS%7CAF%7C
.