Does knowing the price lower your enjoyment of goods and services?

by on March 16, 2017 at 3:38 am in Economics, Uncategorized | Permalink

I don’t quite agree with this as stated, as the experience of enjoying a bargain can make it more pleasurable, or at least I have seen this for many people.   Some in fact enjoy the bargain only, not the actual good or service.  Nonetheless here is the abstract:

Prices are typically critical to consumption decisions, but can the presence of price impact enjoyment over the course of an experience? We examine the effect of price on consumers’ satisfaction over the course of consumption. We find that, compared to when no pricing information is available, the presence of prices accelerates satiation (i.e., enjoyment declines faster). Preliminary evidence suggests price increases satiation by making the experience seem like less of a relaxing break and something to financially monitor. We rule out several alternative explanations for this effect and discuss important implications for marketers and consumer researchers.

That is from Haws, McFerran, and Redden, “The Satiating Effect of Pricing: The Influence of Price on Enjoyment Over Time.”  The original pointer was from Rolf Degen.

1 steveslr March 16, 2017 at 4:41 am

More luxurious experiences tend to be more fixed cost than variable cost. For example, I would imagine that members of Augusta National Golf Club pay the same dues whether they played one round of golf or 100 in a year. (Caddy tips, however, depend upon the number of rounds played.)

Tom Wolfe pointed out that nothing is more calming and creates more of a sense of well-being than “the existence of conspicuous consumption one has rightful access to.”

My impression is that members of Augusta National very, very much enjoy being members of Augusta National.

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2 Bill March 16, 2017 at 7:23 am

And, that all inclusive vacation package paid up front enables you to consume margaritas without thinking about how much they will cost each time you have one.

Thinking about money at the time you consume something reduces the utility of the moment.

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3 Bill March 16, 2017 at 7:26 am

If you want to learn more about this, and also drip pricing, here’s a link: https://www.ftc.gov/sites/default/files/documents/public_events/economics-drip-pricing/vmorwitz.pdf

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4 steveslr March 16, 2017 at 3:04 pm

So, in general, wealthy people prefer to pay a large lump sum for rightful access to conspicuous consumption rather than to be nickeled-and-dimed like passengers on a budget airline.

For example, Wolfe interjected his observation into his college student novel “I Am Charlotte Simmons” in which the rather sad Jewish intellectual student is brow-beaten into appearing at a gay rights rally. He escapes from his humiliation into the Dupont University’s palatial library, where he has every right to be, which cheers him up.

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5 Troll me March 16, 2017 at 3:23 pm

I can definitely smell the money.

But I’m not sure about the relevance of the Jewish student who is a “sad intellectual” or the negative associations of unfreedom in attending a protest.

Couldn’t he have attended the really good library either way? And he’s still stuck in the position of not being welcome at the club unless he can prove the ability to succeed in pursuing an obsession to gain wealth, one where even being nickled and dimed might now be enough for him.

Interesting assortment of associations, etc., to say the least.

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6 GoneWithTheWind March 16, 2017 at 6:22 pm

I make my decision based on value not cost. I am not that interested in only buying or having the best and certainly there are many times when “OK” is more than adequate. But I want to pay what it’s worth. So yes I absolutely have to know the price and if I’m not happy or don’t feel I got value for my money it affects my enjoyment.

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7 prior_test2 March 16, 2017 at 5:43 am

‘Prices are typically critical to consumption decisions, but can the presence of price impact enjoyment over the course of an experience?’

Well, how does one categorize something that is free? For example, between work and home is a lake (Baggersee), my hours are flexible, and on a cloudless hot August day, hanging out there for hours, either alone or with friends, essentially involves no cost.

Economics – trying to place a cost on everything, while ignoring the value of anything.

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8 Someone from the other side March 16, 2017 at 6:38 am

I think there are experiments where people rate wined higher when told that they are expensive so clearly there are effects in all of kinds of directions. Similarly I do not enjoy a good bargain…

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9 Anonymous March 16, 2017 at 9:53 am

We’re they served or paying for those wines?

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10 Milo Fan March 16, 2017 at 11:34 am

+1

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11 Careless March 16, 2017 at 2:52 pm

Pretty sure both (well, they wouldn’t wind up paying the fake inflated price, but thought that they were going to)

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12 Sam The Sham March 16, 2017 at 11:37 am

I find it difficult to enjoy expensive wine or meals even if someone else (that i will never see again) is paying. A good home cooked meal can come in under 6$ and paying over 20 seems such a waste.

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13 Someone from the other side March 17, 2017 at 2:42 am

Ideally a corporate expense account pays, yes

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14 rayward March 16, 2017 at 7:19 am

In an affluent nation like America there’s a bewildering range of choices for almost every product. Just choosing the brand for a can of tomatoes taxes one’s patience. I’m told that choice equals freedom. Freedom! Canned tomatoes! I don’t dislike going to the supermarket, but I do dislike all that freedom. I solve the dilemma by purchasing pretty much the same items every time I go. I go early in the morning before the competition, I mean other shoppers, arrives. Having the store to myself is the kind of freedom that I enjoy most. But I’m never alone. There’s usually one of those shoppers who frets over every choice, comparing prices and contents and size and cash rebates, and comes to the store with reusable bags. Google “apps that save money on groceries” and behold! More choice. And freedom. I understand these people are called “smart shoppers”. If they were so smart they wouldn’t have the time for such nonsense.

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15 Slocum March 16, 2017 at 7:33 am

“Just choosing the brand for a can of tomatoes taxes one’s patience. I’m told that choice equals freedom. Freedom! Canned tomatoes! I don’t dislike going to the supermarket, but I do dislike all that freedom.”

Do you really have your patience taxed by canned tomatoes and dislike your freedom of choice — or are you just following the leftish anti-market party line? I mean canned tomatoes are *really* a problem for you? If so, I offer the following procedure as a public service: 1. Buy whatever’s on sale. 2. If it turns out you don’t like the taste of that brand, don’t buy it again. Or, if you don’t like that algorithm then try 1. Try brands of tomatoes until you find one you like. 2. Keep buying your favorite brand regardless of price (after all, food in the U.S. is really cheap and canned tomatoes especially so). If you enjoy bargain shopping, shop for bargains. If you don’t, then don’t.

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16 Mark Thorson March 16, 2017 at 12:52 pm

I’ve heard that the SM tomatores from Italy are packed in sauce, while other tomatoes are packed in water. That may have something to do with it. I’ve also heard that the reason they are packed in sauce is for tax purposes — packed in sauce they are a food rather than an ingredient, or something like that, which gets them a lower tax rate.

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17 prior_test2 March 16, 2017 at 3:16 pm

‘I’ve also heard that the reason they are packed in sauce is for tax purposes’

In the entire time I have lived in Germany, I have never opened a can of tomatoes, Italian or otherwise, that did not have sauce. To the extent that there is an American law involved, it clearly plays no role in how Europeans expect their tomatoes to be canned. To the extent that there is a European law involved, it is extremely hard to imagine (though not completely impossible) that taxation makes a distinction between ingredient and food.

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18 AlanG March 16, 2017 at 7:45 am

As one who cooks or bakes almost every day of the year, I don’t find the choice of food stuffs a problem at all. Regarding canned tomatoes, the only brand to even consider is ‘San Marzano’ though they may be rebranding them as ‘SMT’. They are the cans with the small colored ring on the top and bottom. I’ve tried all the various brands and these have the most consistent flavor for soup and sauce.

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19 rayward March 16, 2017 at 3:26 pm

Thanks for the tip. I used can tomatoes as the example because, well, I use canned tomatoes in recipes, a lot. I love to cook, and I love to entertain. My problem is that I can’t multi-task. Not sure why, since my father was a chef. I even look like him. But I can’t multi-task. Entertaining and cooking at the same time is stressful, almost as stressful as a root canal. As to many choices, they aren’t freedom, they are torture. It’s like clothing. I don’t blame people for their poor choice of clothing, I blame too many choices. Ever watched people at the airport? How could so many have such poor taste in clothing? Ever been to other peoples’ homes? How could so many have such poor taste in decorating? Ever been to crowded restaurants? How could so many have such poor taste in food? I’ve worn the same clothes (well, the same style) for over 50 years. I’m often asked how I choose my clothing. Easy: I saw Breakfast at Tiffany’s when I was young.

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20 Albigensian March 16, 2017 at 10:10 am

It can be convenient and quick to shop in an Aldi store, as it often offers only store brands and, because there’s little choice and the store itself is small, one can finish the shopping task quickly and easily..

But Aldi is mostly a low-price store. What surprises me is that no one’s yet taken over the “curated grocery store” niche, a high-end grocery that purports to do the research and put out only best-in-category goods (i.e., since they did the research you need not be bothered with choosing).

Of course, a “curated grocery store” would have to establish credibility, but once it does that it should enjoy good margins and high sales per unit area, as it would offer a convenient low-stress shopping experience for its high-end customers.

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21 Jonathan March 16, 2017 at 10:49 am

Albigensian: Citarella is about as close to that as one can get. Very few choices, and note: “curated produce” https://www.citarella.com/content/citarella-greenwich-ct/

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22 Moo cow March 16, 2017 at 11:31 am

Aldi’s brother (literally?) Trader Joe’s might fit the bill.

Some local high end stores do well. Lunds/Byerlys in Minnesota, for example.

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23 Anonymous March 16, 2017 at 11:46 am

Trader Joe’s and Aldi are similar, but TJs has a few more choices that matter to me. I hope TJs never goes away. My wife prefers a big multi-ethnic market, with high turnover and lots of produce. It is too rough and tumble for her friends. They stop at Gelson’s.

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24 Troll me March 16, 2017 at 3:28 pm

I think the freedom aspect is more about the freedom to, say, open up any business, for example a tomato factory. And the fact that freedoms are greater when this delivers competition that results in lower prices and higher quality, which leaves you with more resources to choose more other things (the possibility ot access more options within a budget constraint then being “more freedom”).

While it’s sort of alluded to in economics, that it’s good to have choice, I don’t think anyone seriously believes that huge utiltiy is delivered to consuemrs for the fact of 3 or 5 tomato sauce brands being at the grocery store. It’s all of what goes into having 4 different independent/unaffiliated companies with 4 different brands, and all of what THAT means, that leads to the freedom. And not the choice between brand A, brand B, brand C and brand D, per se.

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25 AlanG March 16, 2017 at 7:40 am

I wonder if publishing in “high priced” Elsevier journals leads to a satiating effect? Not having university access and not willing to pay $35 for what is probably more junk social science (maybe there is something to be said for the draconian Trump budget proposal if it eliminates this kind of research), I will only offer the observation that price in the absence of quality means little.

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26 Axa March 16, 2017 at 8:35 am

Not being able to read the article implies you’re like 99.9% of Earth’s people, why do you think this condition is so special to make a comment out of it?

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27 AlanG March 16, 2017 at 9:00 am

I guess you don’t understand sarcasm.

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28 Axa March 16, 2017 at 9:36 am

So, take my ignorance as a compliment of your great sarcasm skills. That’s the point of sarcasm, right? Only some people should get the message.

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29 Anonymous March 16, 2017 at 10:52 am

Good that Alan tried to click through, a rare commentator.

Alex should line up some offshore labor and try this

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30 Troll me March 16, 2017 at 3:32 pm

Many universities can offer short-term access to library services for free or a small fee. For example a 2-hour pass or something to get access to journals.

Which is still a pretty big barrier, assuming that your time is worth something. Compared to being able to access it from home.

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31 rayward March 16, 2017 at 7:48 am

People will believe just about anything. My favorite “buying app” is the one for buying a car. It puts the buyer in the driver’s seat. It must be a popular app because I can’t turn on my television without seeing that geeky chubby guy with a beard who, with a couple of clicks, finds just the right car at just the right price. He is a smart shopper, and the satisfied expression on his face proves it. It’s not the car it’s the choice. Choice. It’s the American way. There’s an app for that.

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32 Slocum March 16, 2017 at 9:09 am

Why the sneering? There are now a lot of sources of information for help in making good choices (Yelp, Tripadvisor, Amazon reviews, IMDB, etc). And these reviews have pushed vendors to up their games, so even curmudgeons who never consult them still benefit

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33 wiki March 16, 2017 at 3:30 pm

The American Way? Pshaw. Anyone who’s spent time in the Far East, especially, China, Hong Kong, and Taiwan, knows that Americans are pikers when it comes to caring about prices and bargaining.

Chinese and Taiwanese visitors have often noted that Americans are surprisingly reluctant to discuss money and salaries even among friends — just like those snobby WASP caricatures.

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34 Dick the Butcher March 16, 2017 at 7:56 am

An old adage on Wall Street: “It’s not what you buy, it’s what you pay.”

AlanG: “junk social science” is redundant, don’t you think?

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35 AlanG March 16, 2017 at 9:02 am

Redundancy is in the eye of the beholder. 🙂

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36 Dick the Butcher March 16, 2017 at 10:45 am

True. I need to be more charitable. God bless.

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37 dearieme March 16, 2017 at 8:16 am

I’ll tell you what lowers my enjoyment: excruciatingly bad English such as this horror “can the presence of price impact enjoyment over the course of an experience?”

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38 Axa March 16, 2017 at 8:31 am

Amazon Turk…..the abstract made me thing about an experiment in restaurants with real clients.

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39 chrisare March 16, 2017 at 9:04 am

It depends on the good and the consumer. For some, like wine and high end audio, pleasure is increased for some with higher prices. This, IMO, is because quality is so subjective that price is the easiest proxy.

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40 Skype at: Mike_in_Kyiv (Mike Lynn, Kyiv, Ukraine) March 16, 2017 at 9:16 am

I take the opposite view from “Someone from the other side”. The key is to trust your taste. You want to look at quality and price in terms of your perception of value. A resent example I found of a hidden gem was Nugan Durif from Australia. Durif is Petite Syrah to the rest of the world and is rarely made/sold as a stand alone varietal. http://www.nuganestate.com.au/Product/Detail.aspx?p=41&id=13 This was a standout in the Petite Syrah category, with great flavors of cherry and blackberries, medium tannin quality and at under $19.00/bottle, was in my estimation a real value.

There is an unquestioned mystique that builds around certain labels and certain wine products. For instance I can “splurge” (and I use the term tongue-in-cheek) and buy a 1996 Petrus (Pomerol) for $1,903.00/bottle but am more likely to opt for a 2006 Chateau Lafleur-Gazin for $48.00/bottle. The “hidden gem” from Pomerol region in my estimation, the 2006 Chateau Vray Croix De Gay at around $81.00/bottle. I would put the Chateau Vray Croix De Gay up against any of the Petrus wines anytime. I simply do not perceive a value exists in the Petrus that warrants my shelling out such sums of money.

I don’t believe I would loose this trait of wanting to find value in what I buy even if I had unlimited funds for expensive products. I seek value in all my purchases especially wine.

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41 jim jones March 16, 2017 at 9:23 am

Hey Mike, learn how to spell “lose” before your next lecture

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42 Someone from the other side March 17, 2017 at 3:06 am

I partially agree, was treated to Margaux 1984 last year and didn’t particularly care for it. But then I always liked Spanish wines more than French so there is that.

A lot of the high end wines are just overpriced…

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43 Someone from the other side March 17, 2017 at 3:09 am

Hit send too early on the phone, I guess the effect is probably more relevant when W talk about 10 vs 50 vs 100 usd a bottle (or the story of two buck chuck winning against famous wines….)

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44 Anonymous March 16, 2017 at 9:40 am

Dad’s experience is lessened, the teens keep on enjoying.

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45 rayward March 16, 2017 at 10:18 am

I enjoy reading books about American history, the late 18th century and early 19th century especially, biographies being my favorite. Something that we take for granted is liquidity, something investors back then did not enjoy. Wealth then was equated with ownership of assets, in particular real estate (land) and, well, people. The absence of liquidity was a big problem for investors with big ideas. As long as asset prices were rising, it was okay, not so if asset prices were falling. If an owner of assets needed cash, her only choice was to sell or borrow. One only has to read a biography of Thomas Jefferson or George Washington to appreciate that ownership of assets could be as much a burden as , well, an asset. Favoring assets which could actually generate a regular rate of return was an idea that came later, along with markets to provide liquidity. Today, we have highly developed markets in just about everything, and apps to take advantage of them. And it’s a good thing, too, as investors today accumulate assets without a regular rate of return. Indeed, stocks that have experienced the greatest appreciation don’t pay dividends, not now and not ever, and that’s by design. Owners of such stock are like the owners of land and people in early America, Jefferson and Washington, dependent as they are on asset appreciation and liquidity. Jefferson and Washington must have known what they were doing by accumulating so many assets that didn’t generate a regular rate of return, since so many of today’s investors are copying them. Unfortunately for Jefferson and Washington, they didn’t have an accommodating Fed. Today’s investors should count their blessings; and say a few prayers for Ms. Yellen.

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46 Mark Thorson March 16, 2017 at 11:27 am

I find one of the greatest pleasures in life is buying something for a fraction of its value on eBay. There’s a tension and excitement in the last few moments as I wait to see if I won the auction and for what price. The best ones are where the seller has misdescribed the item, usually because he or she doesn’t know what it is, such as the antique X-ray tube which was described as chemistry glassware. Normally, these go for hundreds of dollars. Mine is practically unused and it works.

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47 Jackson Layers March 17, 2017 at 12:29 pm

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