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Diversions January 12, 2012
How Much Would You Pay For That?
A study published in the Journal of Consumer Research suggests that we overestimate what others will pay for consumer goods.
Reported by Corie Russell
Shane Frederick, an associate professor of marketing at the Yale School of Management, ran a series of experiments to discover how good people were at estimating what others might pay for various consumer goods including teddy bears, artwork, smoked salmon and books.
Thirty-five students at the Massachusetts Institute of Technology (MIT) bid on 10 products and estimated what the median bid would be. On average, they overestimated the median bid by 43%, according to the study.
People’s overestimation of what others will pay even applied to imaginary goods, such as a magic pill that allows one to speak French.
The estimates were better for non-monetary payments, or manual labor, such as the number of pencils a person would sharpen in order to obtain the good.