The Electric Commentary

Thursday, October 13, 2005

This sounds interesting.

An excerpt from the book The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor--and Why You Can Never Buy a Decent Used Car! by Tim Harford:

Companies find it more profitable to increase prices (above the sale price) by a larger amount on an unpredictable basis than by a small amount in a predictable way. Customers find it trouble some to avoid unpredictable price increases -- and may not even notice them for lower-value goods -- but easy to avoid predictable ones...

Have you noticed that supermarkets often charge ten times as much for fresh chili peppers in a package as for loose fresh chilies? That's because the typical customer buys such small quantities that he doesn't think to check whether they cost four cents or forty. Randomly tripling the price of a vegetable is a favorite trick: customers who notice the markup just buy a different vegetable that week; customers who don't have self-targeted a whopping price rise.

I once spotted a particularly inspired trick while on a search for potato chips. My favorite brand was available on the top shelf in salt and pepper flavor and on the bottom shelf, just a few feet away, in other flavors, all the same size. The top-shelf potato chips cost 25 percent more, and customers who reached for the top shelf demonstrated that they hadn't made a price-comparison between two near-identical products in near-identical locations. They were more interested in snacking.


(Hat tip, Marginal Revolution)

I'll have to pick that up next month. Right now I'm reading The Singularity is Near by Ray Kurzweil, which is surprisingly entertaining. Here's a review by Glenn Reynolds in the WSJ. Kurzweil is an inventor/computer scientist, and has created some of the most sophisticated voice recognition software in existence (an bunch of other stuff too).

I'm also reading Middlesex, by Jeffrey Eugenides, which is also quite good, and to this point (about 200 pages in) can best be described as a touching tale of immigration and incest.

I'm about 1/3 finished with each, and so far I'd recommend both.

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