Charm Pricing: Anderson (University of Chicago) & Simester (MIT) worked with a mail order firm to print different versions of its catalogue. They found an item sold 30% more when priced at $39 than $34. Buyers deem prices ending in a 9 as better value than those that don’t.
Loss Aversion: Losing money hurts more than gaining the same sum delights. Imagine betting on a coin toss. If it’s tails you lose $100. The average person requires heads to pay out £200 to take on the bet. Money we have is around twice as valuable as money we don’t have.
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William Poundstone offers many examples of how our perceptions of prices vary depending on cues, context and contrast.
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