tag:blogger.com,1999:blog-4522018539311056682.post7828869610648812724..comments2024-03-27T01:28:28.346-07:00Comments on False Machine: A Review of 'Priceless' by William Poundstonepjamesstuarthttp://www.blogger.com/profile/13288777018721199748noreply@blogger.comBlogger10125tag:blogger.com,1999:blog-4522018539311056682.post-90823835910358235262019-04-22T13:31:16.540-07:002019-04-22T13:31:16.540-07:00Anchoring is one of a long list of factors that in...Anchoring is one of a long list of factors that influence the price people are willing to pay. It sucks as it makes us prone to manipulation, but it’s part of being human. And many of the other factors that contribute to agreed price are just as arbitrary and unrelated to the value of the product. When it comes to more traditional negotiated transactions, as opposed to modern fixed price transactions, stupid things like height, beauty, relative social status, and the buyer’s and seller’s charisma stats are big factors in determining the price paid. Trade is human interaction and humans are messy and not 100% rational. There’s a butterfly effect involved: There are so many factors involved in a transaction that you can’t reasonably measure all of them, or even identify all of them, before the transaction takes place. Which is why, as you pointed out, we have more trust in prices in markets that have more transactions, and spend less time making a decision to buy eggs than to buy a car or house. And so the only real price is what was paid. jamescbennetthttps://www.blogger.com/profile/06603912011980275273noreply@blogger.comtag:blogger.com,1999:blog-4522018539311056682.post-90093761843877419352019-04-18T12:45:32.773-07:002019-04-18T12:45:32.773-07:00(Apologies in advance for a long comment.)
@james...(Apologies in advance for a long comment.)<br /><br />@james how do you interpret a willingness to pay experiment where people are randomly assigned to conditions with high and low numerical anchors that finds people presented with (unrelated) high numbers being willing to pay more than people presented with (unrelated) low numbers?<br /><br />One example from a field study: ... <i>The presence of an incidental price elevated the average bid among shoppers from $7.29 (median = $7.50, standard error = $.54) when the sweatshirt was priced low ($10) up to $9.00 (median = $10.00, standard error = $.64) when the sweatshirt was priced high ($80).</i> ...<br /><br />Nunes, J. C., & Boatwright, P. (2004). Incidental prices and their effect on willingness to pay. Journal of Marketing Research, 41(4), 457-466.<br /><br />(A web search should allow you to find the full text of that paper if you are curious about any details. This effect is widely documented both in lab and field experiments.)<br /><br />I am responding to your first paragraph, the claim that a price agreement is solid, rather than your second paragraph, about oughts. (I see no ought claims in Patrick's post or any of the comments so far.)<br /><br />Your note that prices are somehow bound to real transaction events is good though, and is why prices for goods in illiquid markets are less defined than prices for goods in markets with frequent transactions. If transactions never happen, a market participant cannot consider prospective opportunity costs, something that can occur if an expected price is known even in the absence of the participant engaging in a transaction themselves.Necropraxishttps://www.blogger.com/profile/12716340801054739658noreply@blogger.comtag:blogger.com,1999:blog-4522018539311056682.post-51029048250731341252019-04-18T07:10:46.255-07:002019-04-18T07:10:46.255-07:00There is a solid, objective price for things. It&#...There is a solid, objective price for things. It's whatever price the merchant and customer agree on for that individual transaction. <br /><br />Trade is nothing more than human beings interacting non-violently with people they hate; concrete, physical, measurable events occurring in the real world. But once you start talking about what a price, or anything else, "ought" to be, you are leaving the realm of science and entering into the realm of philosophy. Economics straddles that line and often fails to notice which side they are on when drawing conclusions.jamescbennetthttps://www.blogger.com/profile/06603912011980275273noreply@blogger.comtag:blogger.com,1999:blog-4522018539311056682.post-49641928125042255092019-04-17T21:33:51.532-07:002019-04-17T21:33:51.532-07:00do Das Kapital nextdo Das Kapital nextDunkey Haltonhttps://www.blogger.com/profile/14402191799610897998noreply@blogger.comtag:blogger.com,1999:blog-4522018539311056682.post-29200761800917054552019-04-17T15:37:39.264-07:002019-04-17T15:37:39.264-07:00Perhaps there are better ways to understand barter...Perhaps there are better ways to understand barter exchanges during stressful encounters than pricing.<br /><br />How useful is it to reflect on the negative reinforcement value of pain for learning when touching a hot stove?Necropraxishttps://www.blogger.com/profile/12716340801054739658noreply@blogger.comtag:blogger.com,1999:blog-4522018539311056682.post-42817919576460652732019-04-17T15:18:24.457-07:002019-04-17T15:18:24.457-07:00To clarify, by expert endorsement being an objecti...To clarify, by expert endorsement being an objective fact I mean that an expert did in fact make a particular endorsement rather than that the endorsement itself represents something true about the world. For example, about The Worm Ouroboros you wrote: <i>I found this to be an exceptional book</i>. Your statement of approval could change the book's price for people that trust your opinion by increasing willingness to pay, increasing demand, changing forecasts of future supply, and so forth.Necropraxishttps://www.blogger.com/profile/12716340801054739658noreply@blogger.comtag:blogger.com,1999:blog-4522018539311056682.post-76160227960473381822019-04-17T11:33:11.218-07:002019-04-17T11:33:11.218-07:00I suspect that Poundstone would disagree with you ...I suspect that Poundstone would disagree with you about the 'relatively objective facts', especially the experts endorsement.<br /><br />I don't like it when things dissolve into air. I want the world to make sense, be solid and provide a predictable future for the people in it. If everything is just made up then that's frightening. <br /><br />This is an old back and forth between us.<br /><br />Imagine any actual, living human in any actual high stress situation like a flood or famine. You are haggling for a tin of spam. They make and offer. You say; "Prices represent best guesses about the uncertain future. How could prices every be anything other than ethereal, consensual agreement?"<br /><br />How long until you get stabbed?pjamesstuarthttps://www.blogger.com/profile/13288777018721199748noreply@blogger.comtag:blogger.com,1999:blog-4522018539311056682.post-26200326944803309662019-04-17T09:56:04.399-07:002019-04-17T09:56:04.399-07:00Well, some Economists use the methods of Psycholog...Well, some Economists use the methods of Psychologists, reinvent our wheels and call it "behavioral economics" ...<br /><br />Yeah, that style is pretty much the way social science gets transmitted to the masses since Gladwell.Roger G-Shttps://www.blogger.com/profile/08594440701279968693noreply@blogger.comtag:blogger.com,1999:blog-4522018539311056682.post-51326225420507207342019-04-17T09:23:19.890-07:002019-04-17T09:23:19.890-07:00(Man, I need to proofread better on Blogger: *how ...<i>(Man, I need to proofread better on Blogger: *how could prices EVER be anything... *no matter THE way price discovery occurs...)</i>Necropraxishttps://www.blogger.com/profile/12716340801054739658noreply@blogger.comtag:blogger.com,1999:blog-4522018539311056682.post-80689720403721637392019-04-17T09:20:47.119-07:002019-04-17T09:20:47.119-07:00Prices represent best guesses about the uncertain ...Prices represent best guesses about the uncertain future. They are shaped by relatively objective facts, of course, such as current stock levels and expert endorsement, but at a fundamental level how could prices every be anything other than ethereal, consensual agreement? Why do you find this deeply worrying? (Prices have this property no matter they way price discovery occurs; markets aggregate best guesses of people making transactions while regulated prices represent the best guesses about the future by technocrats.)Necropraxishttps://www.blogger.com/profile/12716340801054739658noreply@blogger.com