Cheap (41 page)

77
that behavior after it occurs:
George Lowenstein, “The Creative Destruction of Decision Research,”
Journal of Consumer Research
28, no. 3 (December 2001).

79
concluded in their assessment:
On Amir and Erica Dawson, “Motivating Discounts: Price-Motivated Reasoning,” June 2007. At this writing, this was a work in progress, available at
http://ssrn.com/abstract=997474
.

80
almost impossible to predict
: A. Tversky and D. Kahneman, “Judgment Under Uncertainty: Heuristics and Biases,”
Science
185: 1124-31.

80
customers will consider fair
: Gretchen B. Chapman and Eric J. Johnson, “Incorporating the Irrelevant: Anchors in Judgments of Belief and Value,” in T. Gilovich, D. W. Griffin, and D. Kahneman (eds.),
The Psychology of Intuitive Judgment: Heuristics and Biases
(New York: Cambridge University Press, 2002).

80
those external clues might be
: Kristina Shampanier, Nina Mazar, Dan Ariely, “Zero as a Special Price: The True Value of Free Products,”
Marketing Science
26, no. 6 (December 2007): 742-57.

81
factors such as rabid discounting:
Thanks to Harvard computer scientist David Parkes, an expert on the mathematics of auctions, for speaking with me on this issue.

81
bidder’s heat or auction fever
: Young Han Lee and Ulrike Malmendier, “The Bidder’s Curse,” NBER Working Paper No. W13699, December 2007. Available at SSRN:
http://ssrn.com/abstract=1080202
.

82
had their money returned
: Christopher Shea, “eBay-nomics: Modern Economists Have Assumed That People in Auctions Behave Rationally. Then Came eBay,”
Boston Globe,
June 10, 2007.

82
“profit-leaking paradox”
: Rafi Mohammed,
The Art of Pricing
(New York: Crown, 2005), 24.

82
“opposition to one of their various judgments”
: Janet Landman,
Regret: The Persistence of the Possible
(New York: Oxford University Press, 1993), 116.

85
the response was a resounding no
: Daniel Kahneman, Jack L. Knetsch, and Richard H. Thaler, “Fairness as a Constraint on Profit Seeking: Entitlements in the Market,”
American Economic Review
76 (September 1986): 728-41.

85
got pretty much the same response
: Raymond Gorman and James B. Kehr, “Fairness as a Constraint on Profit Seeking: Comment,”
American Economic Review
82, no. 1 (1992): 355-58.

85
“biggest mistake was getting caught”
: David Wessel, “How Technology Tailors Price Tags,”
Wall Street Journal
, June 21, 2001.

86
early birds deserved to pay more
: On the
Wired
magazine blog network, one gleeful “late adapter” wrote: “The early iPhone buyers paid a premium precisely to be among the first and the ‘coolest.’ Now the price has dropped, tough cookies.” Writing on the same blog, an early adapter took a different view: “LAME!!! All I can say to you Steve is you’ve lost one of your most enthusiastic early adopters. I’ll never buy another Apple product until it’s been out at least 90 days. That way I won’t get screwed out of money and have to deal with a buggy product at the same time. Hopefully Apple will keep churning out great products, but I, for one, won’t get burned again. Fool me once, shame on you; fool me twice, shame on me!” See
http://blog.wired.com/business/2007/09/steve-
jobs-to-a.html.

90
Europe, Japan, and Hong Kong:
James Fallon, “First European Designer Mall in England Is a Hit,”
Daily News Record
, June, 1995; Jacy Meyer, “A New Showcase for Brand Names,”
The Prague Post,
October 18, 2006.

90
Turkey, Dubai, and South Africa:
For basic statistics on outlet malls, I used
Value Retail News
at
http://www.valueretailnews.com
.

90
growing segments of the
travel
industry:
Edwin McDowell, “America’s Hot Tourist Spot: the Outlet Mall,”
New York Times
, May 26, 1996.

90
worth of outlet visits each year
: Outlet Malls,
Consumer Reports
63, no. 8 (August 1998): 20.

91
what appears to be wild abandon
: Margaret Crawford, “The World in a Shopping Mall,” in Malcolm Miles and Tim Hall, eds. with Iain Borden,
The City Cultures Reader,
second ed. (New York: Routledge, 2004), 127.

91
real estate is cheap and the tax incentives sweet:
See, for example, Thomas W. Hanch ett, “U.S. Tax Policy and the Shopping Center Boom of the 1950s and 1960s,”
American Historical Review
(October 1996): 1082-1110. Hanchchett traces the explosion in shopping malls to a loophole in the tax code that allowed for “accelerated depreciation,” which transformed real estate development into a lucrative tax shelter for developers.

91
avoid angering full-price retailers:
Parke Chapman, “Bargain Hunters Keep Outlet Malls Humming,”
National Retail Estate Investor
45, no. 4 (2003): 15.

92
“sky and landscape seemed to dance”:
Zola modeled his fictional store after Le Bon Marche in Paris. Opened in 1852, it is widely referred to as the first modern department store.

92
“phobia of entering a store”
: M. Jeffrey Hardwick,
Mall Maker: Victor Gruen, Architect of an American Dream
(Philadelphia: University of Pennsylvania Press, 2004), 32.

93
with brightly colored birds
: Biographical information on Victor Gruen was obtained in “
Victor Gruen: A Register of His Papers
in the Library of Congress,” prepared by Harry G. Heiss, 1995. Available at
http://lcweb2.loc.gov/service/mss/eadxmlmss/eadpdfmss/2001/ms001017.pdf
; Malcolm Gladwell, “The Terrazzo Jungle,”
The New Yorker
, March 15, 2004. Gladwell cites M. Jeffrey Hartwick’s biography of Gruen,
Mall Maker,
as an important source for his piece.

93
malls would be modeled and are still
: Margaret Growford, “Suburban Life and Public Space,” in David J. Smiley, ed.,
Redressing the Mall
(New York: Princeton Architectual Press, 2002), 24-25, available on the Web as part of the series Sprawl and Public Space at
http://www.arts.gov/pub/Design/SprawlPubSpace
. pdf.

94
“for suburbia’s community life”
: Lizabeth Cohen, “From Town Center to Shopping Center: The Reconfiguration of the Community Marketplaces in Postwar America,”
American Historical Review
(October 1996): 1050-81. See also Victer Gruen, “Introverted Architecture,”
Progressive Architecture
38, no. 5 (1957): 204-208.

94
it was
the
driving force
: An interesting essay on Gruen from a socialist perspective can be found in Anette Baldauf, “Shopping Town USA: Victor Gruen, the Cold War, and the Shopping Mall,”
Documenta Magazine
’s online journal, August 2007, at
http://magazines.documenta.de/frontend/article.php?IdLanguage=5&NrArticle=1736
.

94
“the longer people will stay”:
Mary Ann Galante, “Mixing Marts and Theme Parks,”
Los Angeles Times
, June 14, 1989, quoting mall developer Bill Dawson.

94
in 1960 to nearly three hours in 1979
: Margaret Crawford, “World in a Shopping Mall,” 130.

95
“they will visit again in the future”
: Leslie Stoel, Vanessa Wickliffe, and Kyu Hye Lee, “Attribute Beliefs and Spending as Antecedents to Shopping Value,”
Journal of Business Research
, 57, no. 10 (October 2004): 1067-73.

95
all but abandoned by their parents
: Sara B. Miller
, “
At Shopping Malls, Teens Hanging Out Is Wearing Thin,”
Christian Science Monitor
, August 11, 2005.

95
but does a quickie through the drive-through
: For insight into this and other tricks of the fast-food trade, see Ellen Ruppel Shell,
The Hungry Gene
(New York: Atlantic Monthly Press, 2002).

96
would at a fully loaded regional mall
: A. Coughlan and D. Soberman, “A Survey of Outlet Mall Retailing: Past, Present, and Future,” INSEAD Faculty & Research Working Paper Series, 2004.

96
“recreational model of consumption”:
Marianne Conroy, “Discount Dreams: Factory Outlet Malls, Consumption, and the Performance of Middle-Class Identity,”
Social Text
54 (Spring 1998): 63-83.

98
Lightning McQueen remote-control vehicles
: This helpful symbiosis came to an end when K. B. Toys went bankrupt for the second time in late 2008.

98
manipulate customers’ willingness to buy
: Interestingly, after leaving Las Vegas I learned that the Penney high/low pricing strategy had been exposed years earlier. In July 1992 the North Carolina attorney general’s office charged the company with inflating its jewelry prices with markups as high as five times cost and then advertising discounts of 60 percent off the regular price. The judge ruled that Penney had not violated any state laws and, in fact, it would be unfair to single out the department store for bad practices because fully 80 percent of jewelry competitors promoted sale prices based on inflated regular prices.

101
mattress tagged as such
: Paul N. Bloom and Gregor T. Gundlach, eds.,
Handbook of Marketing and Society
(Thousand Oaks, Calif.: Sage Publishing, 2001), 251.

101
“They don’t want their product shopped”
: The bedding industry is notorious for its pricing tactics, which several experts discussed with me at length. For a good press summary of the issue see Kimberly Janeway, “Why Consumer Reports doesn’t rate specific models of mattresses,”
ConsumerReports.Org,
January 26, 2008.

102
“encrusted with sapphires, diamonds, silver and gold”:
Dana Thomas,
Deluxe: How Luxury Lost Its Luster
(New York: Penguin Press, 2007), 22.

103
“It was about making money, a lot of money”:
Ibid., 34

103
sold it to the Sara Lee Corporation in 1985
: Telephone interview with Miles Cahn, December 10, 2007. After selling his company, Cahn “retired” to a farm in upstate New York and built up a second successful business in goat cheese, which he sold in 2007. When I asked him about his next venture, the ninety-year-old entrepreneur deadpanned, “Toilet paper. If I could sell one roll to every asshole out there, I’d make a fortune.”

104
manufactured specifically for these stores
: Sandra Jones, “Coach’s New Purse Line Makes Play for High End,”
Chicago Tribune
, February 19, 2007.

105
“Past, Present, and Future”
: Anne T. Coughlan and David A. Soberman, “A Survey of Outlet Mall Retailing: Past, Present and Future,” 2004, available online at
http://library.nyenrode.nl/INSEAD/2004/2004-036.pdf
.

105
“in isolated single-store locations”
: Ibid.

105
warehouse in Reading, Pennsylvania
: Alexander Gavin,
The American City, What Works, What Doesn’t
(New York: McGraw Hill Professional, second edition, 2002), 143.

106
to ancient Egyptian seals:
See, for example, David Wengrow, “Prehistories of Commodity Branding,”
Current Anthropology
49, no.1, February 2008. Wengrow in triguingly argues that while we generally associate the rise of brands with the rise of modern-day consumerism, “comparisons between recent forms of branding and much earlier modes of commodity marking associated with the Urban Revolution of the fourth millennium B.C. suggest that systems of branding address a paradox common to all economies of scale and are therefore likely to arise (and to have arisen) under a wide range of ideological and institutional conditions, including those of sacred hierarchies and stratified states.”

107
Dior items peddled on the site were counterfeit
: Dana Thomas,
Deluxe,
292.

107
only through selected retailers with trained staff
: Thierry Leveque, “LVMH Wins Compensation from eBay Over Counterfeits,”
Reuters,
June 30, 2008.

107
manufacturers appear willing to do
: Mylene Mangalindan and Vanessa O’Connell, “eBay Wins in Fight Over Tiffany Counterfeits,”
Wall Street Journal,
July 15, 2008, B1.

107
“and the most extreme conditions”:
As stipulated on The North Face Web site at
www.thenorthface.com
.

107
different prices under the same brand
: Lisa Lockwood, “Guess’ Retail Gambit Pays Off,”
Women’s Wear Daily
, 192, no 90, October 30, 2006.

108
Harvard is diluting its brand and in a sense counterfeiting itself
: Thanks to my colleague Patrick Kaufman, chairman of marketing at Boston University, for his thoughts on the self-counterfeiting of name brands.

109
entire cold weather line
: Maureen Tkacik, “Markdown-Economics,”
New York Magazine
, January 14, 2006.

110
“pants down—and their coats off”
: Michael Barbaro, “In Shirt-Sleeve Holiday Season, Overcoats Linger on the Racks,”
New York Times
, December 23, 2006.

110
he said, is “off its axis”:
Guy Trebay, “Luxury Prices Are Fallling; the Sky, Too,”
New York Times,
December 4, 2008.

110
“What I’m worried about is the creativity”
: Ibid., quoting Beth Buccini, an owner of the chic Manhattan (SoHo) boutique Kirna Zabete.