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Can High Price Positively Affect Perception of Value?

post #1 of 41
6/4/09 at 7:38pm
Thread Starter 
Doing a research paper right now on the effects of perception of value in the foodservice industry. I ran across this study conducted by Stanford and thought it was kind of interesting.

http://www.sciencedaily.com/releases...0126101053.htm

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According to researchers at the Stanford Graduate School of Business and the California Institute of Technology, if a person is told he or she is tasting two different wines"”and that one costs $5 and the other $45 when they are, in fact, the same wine"”the part of the brain that experiences pleasure will become more active when the drinker thinks he or she is enjoying the more expensive vintage.
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post #2 of 41
6/4/09 at 7:41pm
It is a well documented FACT.

Applies to every aspect of life, including clothing and shoes.
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post #3 of 41
6/4/09 at 7:42pm
Imagine how excited these brain cells would get if they were not only told that it's a $45 wine, but also that they can buy it now at a discount for only $2... I believe it is widely known in the neuroscience field as the Moo factor
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post #4 of 41
6/4/09 at 8:01pm
You have to have a decent product before you start overpricing it - you can't polish a turd.
With the wine example I'd definitely fall for it if I was told a $20 bottle of wine was a $45 bottle. As I'm quite expert in the quality of $5/bottle wine I'm not so sure I'd believe I was drinking expensive stuff.
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post #5 of 41
6/4/09 at 8:15pm
Something along the lines of a veblen good? There was some US pen manufacturer that basically doubled its prices, whilst leaving the goods more or less the same and their sales rose rapidly.

It would be hard to distinguish between people actually perceiving something as better and reporting that they had perceived a more expensive product as better because they wanted to fit in/display their superior taste - no one wants to risk looking like a fool by saying this $100 bottle of wine doesn't actually taste that great - If other people think it is worth $100 it must be great.
I am pretty sure this sort of stuff has been done with tap water dressed up as bottled water etc.
But quite aside from that I can see how increased price might actually increase the perceived value, particularly on something like restraunt food, which to the layman (including myself) it is pretty hard to judge value.
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post #6 of 41
6/4/09 at 8:24pm
Quote:
Originally Posted by gdl203 View Post
Imagine how excited these brain cells would get if they were not only told that it's a $45 wine, but also that they can buy it now at a discount for only $2... I believe it is widely known in the neuroscience field as the Moo factor

Now imagine the wine has turned sour and tastes like vinegar and we've got a funny thread on www.wineforum.net
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post #7 of 41
6/4/09 at 8:31pm
It's a signal that there is reasonable demand for the good at that price, so we take that to mean that there has to be some reason that people like it, and we assume that we will as well. I'm not aware that anybody has confirmed the actual existence of a Veblen good.
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post #8 of 41
6/4/09 at 8:35pm
Quote:
Originally Posted by iammatt View Post
It's a signal that there is reasonable demand for the good at that price, so we take that to mean that there has to be some reason that people like it, and we assume that we will as well.

I'm not aware that anybody has confirmed the actual existence of a Veblen good.

Well MOST goods have a positional element nowadays. Not everything has to be 100% or 0 but some are pretty close to 100%. Private art consumption is almost entirely conducted as if the people were purchasing Veblen goods.


BTW most of those studies done about goods evaluating using price are about cheaper goods where the information required to evaluate differently versus the amount of effort needed to do so make it a sensible solution. That's why you don't read books about diapers but purchase according to price and then your own experience.
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post #9 of 41
6/4/09 at 8:41pm
BTW I suck and discussed positional goods instead of Veblen goods.
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post #10 of 41
6/4/09 at 8:47pm
If this were not the case, why would rappers and other assorted douchebags beat on about how much everything they have costs?
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post #11 of 41
6/4/09 at 8:49pm
Thread Starter 
Quote:
Originally Posted by tagutcow View Post
If this were not the case, why would rappers and other assorted douchebags beat on about how much everything they have costs?

That's because they want to flaunt their money. This is different. The subjects in this study didn't pay for the wine, and they knew they were being studied, so it's likely that that would not be the reason behind this. On top of that, the study actually measured activity in the center of the brain that controls pleasurable impulses. These spiked when the people drank the cheaper wine that they thought was more expensive--- it had nothing to do with looking like they had more money. The actual chemical activity in the brain heightened, meaning that the price affected how much they actually enjoyed the wine.
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post #12 of 41
6/4/09 at 9:01pm
I'm fixin' to ask j if he'd charge admission for y'all read my threads/posts, under the belief that y'all will find my posts more funny, eloquent, and persuasive.
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post #13 of 41
6/4/09 at 9:02pm
Thread Starter 
Quote:
Originally Posted by Thomas View Post
y'all will find my posts more funny, eloquent, and persuasive.

C'est impossible.
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post #14 of 41
6/4/09 at 9:07pm
One of the Caltech researchers was my undergrad classmate. I remembered that we had some sort of housing issue to solve, and like an economist, he suggested using money to resolve how to best distribute the limited resources. The outrage from the rest of the students, a bunch of hippy-ish liberals not atypical of undergraduate students especially at Caltech, was so great (yelling, tears, etc.) that he never brought it up again.

--Andre
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post #15 of 41
6/5/09 at 12:12am
Quote:
Originally Posted by Fuuma View Post
BTW I suck and discussed positional goods instead of Veblen goods.
WRT positional goods or whatever you want to call them, I agree. People buy goods, say a car, for satisfaction, and that satisfaction is in no way limited to driving experience, but also includes image, social position etc, so it makes all the sense in the world.
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