RE: People, Prices, Haggling and Other Inconsistencies
One of my favorite areas of study is behavioral economics. Richard Thaler’s book Misbehaving is excellent and I highly recommend it. Based on your blog I think you would thoroughly enjoy it.
Anyhow, one of the experiments he ran went something like this: he asked two groups of people to imagine they were at the beach and their friend offered to go back to the street and buy them a Coke. They asked what the dollar amount would be that they would be willing to give the friend to purchase the drink.
The first group was told their friend would buy the drink from a run-down old bodega. The second group was told their friend would buy the drink from the bar of a fancy resort. Both groups were told that the drink was identical.
The first group said they would give their friend significantly less money to buy the drink than the second.
So to loop back to your post, I think it all reflects on psychology and what people are conditioned to expect. In this case, we as a society have collectively decided (apparently) that haggling with a sole proprietor is acceptable while haggling with a corporation is not. Why? I have no idea! 😂
It’s fascinating to me though why people act how they act and your anecdote is yet another example of behavioral economics at work. I believe Thaler’s term for this phenomenon was “transaction utility.” So the experience of walking into an air conditioned store to buy a product of standardized quality where the cashier accepts payment with a credit card makes someone willing to spend more money than on the same product purchased outdoors in the heat at a cash-only mobile vendor who won’t be there tomorrow to sue if the burrito gives you food poisoning. Transactional utility at play 🙂
Furthermore to the point @dollarsandsense.
I’m in the wrong line of work.
LOVE behavioral economics. Good find, thanks!
Sounds like an interesting book @dollarsandsense; I took a quick gander at some online reviews and I think you're quite right that I would enjoy it. I have always been of the belief that for ANYone to call themselves an "economist" they should be required to take a minimum of two years of behavioral psychology to understand humans, and specifically to understand the fact that humans are in no way rational or logical... and the whole notion that free markets are "efficient" is pure bullshit.
My personal interest has long been in examining and understanding the psychological aspects of consumer behavior and marketing. Because I always watched people do things that make little sense... and when asking some of those people, even they agreed that what the did made little sense... and yet those were the actions they took.
Then this book is right up your alley! He has so many interesting studies and experiments in there that show exactly what you’re talking about. And he doesn’t write like a stuffy college professor, either.
He also talks about his split with the traditional economics field and how he came to that same realization that you did: you can’t be a economist if you don’t factor in the human factor.