- Bargaineering - http://www.bargaineering.com/articles -

Your take: Does a high price make you think it’s better?

The other day I was shopping for some new earbuds online and I saw a Panasonic pair with 4 1/2 stars and tons of glowing reviews. I haven’t bought Panasonic anything in years, and the price was only $7, so I ignored the good reviews and looked elsewhere, finally settling on a well-reviewed but slightly more expensive pair from Sennheiser.

The pair I ended up with were ok, but I haven’t been blown away, so imagine my chagrin when I saw a very similar Panasonic pair win in a showdown of 40 different pairs of earbuds [3], many costing substantially more.

So, in the end, I passed up a very good deal on a pair of headphones because the price was too low, assuming there was some kind of flaw I didn’t know about [4] and was too lazy to investigate. That’s pretty stupid, but it turns out I’m very much not alone in judging products by its price.

My dad used to work for a software company that made industrial modeling software and then use it to create industrial simulations to help companies make their operations more efficient. At first, they were unsuccessful at getting corporate clients to sign on, until one day a high-level contact at a company pulled him aside and said, “I can’t sell this to my bosses; the price is too low. Can you raise it?”

They did, and sales went up!

There’s actually lots of research that shows people inherently judge items to be better the more expensive they are, especially items where quality is subjective and hard to judge, such as cigars, wine and audio equipment. After all, a pair of headphones that I think sound amazing may sound like total crap to you, and vice versa, so if we can’t listen to the headphones, and the opinions of others don’t seem to predict whether I’ll like them or not, the only thing that’s left is brand and price.

This effect is so powerful that increasing the price of something can actually make your brain experience it as more pleasurable. In 2008, scientists at Stanford decided to mess with subjects [5] by putting a way-too-low price on an expensive bottle of wine and a way-too-high price on a cheap bottle of wine.

After looking at the price tags, brain scans seemed to show participants enjoying the cheap wine way more once you slapped a $45 price tag on it, and enjoying the expensive wine way less when you slapped a $10 price on it! I can only imagine how entertaining it must have been to tell the test subjects how easily they’d been manipulated; hopefully they were drunk enough not to feel too bad about it.

That’s why careful research done by organizations like Consumers Union is so important. Absent real, reliable data gathered by a disinterested party, the human mind is going to make all kinds of idiotic judgments about quality based on price and other factors that are irrelevant to actual quality.

So what I’m interested in hearing is, do you judge items based on price? Do you have basic rules like “never buy the cheapest one”? When is a high price better? Spill it!