Priceless: The Myth of Fair Value » (First Edition)

William Poundstone is the author of two previous Hill and Wang books: Fortune’s Formula and Gaming the Vote.

Prada stores carry a few obscenely expensive items in order to boost sales for everything else (which look like bargains in comparison). People used to download music for free, then Steve Jobs convinced them to pay. How? By charging 99 cents. That price has a hypnotic effect: the profit margin of the 99 Cents Only store is twice that of Wal-Mart. Why do text messages cost money, while e-mails are free? Why do jars of peanut butter keep getting smaller in order to keep the price the “same”? The answer is simple: prices are a collective hallucination.

In Priceless, the bestselling author William Poundstone reveals the hidden psychology of value. In psychological experiments, people are unable to estimate “fair” prices accurately and are strongly influenced by the unconscious, irrational, and politically incorrect. It hasn’t taken long for marketers to apply these findings. “Price consultants” advise retailers on how to convince consumers to pay more for less, and negotiation coaches offer similar advice for businesspeople cutting deals. The new psychology of price dictates the design of price tags, menus, rebates, “sale” ads, cell phone plans, supermarket aisles, real estate offers, wage packages, tort demands, and corporate buyouts. Prices are the most pervasive hidden persuaders of all. Rooted in the emerging field of behavioral decision theory, Priceless should prove indispensable to anyone who negotiates.

The Washington Post - Steven Pearlstein

Much of behavioral economics…has focused on the seemingly crazy ways in which people and prices interact. In his new book, Priceless, William Poundstone offers a thoroughly accessible and enjoyable tour of this research. Although not an economist, Poundstone is an engaging intellectual historian…It was more than a century ago that Oscar Wilde famously observed that "people know the price of everything and the value of nothing." In Priceless, we now have the proof.

1 The $2.9 Million Cup of Coffee 3

2 Price Cluelessness 8

3 The Myth of the Boomerang 17

4 Body and Soul 25

5 Black Is White 34

6 Helson's Cigarette 38

7 The Price Scale 42

8 Input to Output 49

9 Lunch with Maurice 56

10 Money Pump 62

11 The Best Odds in Vegas 71

12 Cult of Rationality 77

13 Kahneman and Tversky 81

14 Heuristics and Biases 86

15 The Devil's Greatest Trick 93

16 Prospect Theory 97

17 Rules of Fairness 104

18 Ultimatum Game 109

19 The Vanishing Altruist 116

20 Pittsburgh Is Not a Culture 120

21 Attacking Heuristics 125

22 Deal or No Deal 129

23 Prices on the Planet Algon 134

24 The Free 72-Ounce Steak 143

25 Price Check 149

26 Shilling for Prada 155

27 Menu Psych 159

28 The Price of a Super Bowl Ticket 165

29 Don't Wrap All the Christmas Presents in One Box 169

30 Who's Afraid of the Phone Bill? 172

31 Breakage and Slippage 176

32 Paying for Air 179

33 Cheap and Cheaper 182

34 Mysteries of the 99-Cent Store 184

35 Meaningless Zeros 193

36 Reality Constraint 196

37 Selling Warhol's Beach House 202

38 Groundhog Day 207

39 Anchoring for Dummies 213

40 Attention Deficit 215

41 Drinking and Deal Making 219

42 An Octillion Doesn't Buy What It Used To 223

43 Selling the Money Illusion 230

44 Neutron Jane 234

45 The Beauty Premium 239

46 Search for Suckers 241

47 Pricing Gender 245

48 It's All About Testosterone 248

49 Liquid Trust 252

50 The Million-Dollar Club 255

51 The Mischievous Mr. Market 260

52 For the Love of God 266

53 Antidote for Anchoring 269

54 Buddy System 272

55 The Outrage Theory 276

56 Honesty Box 280

57 Money, Chocolate, Happiness 284

Notes291

Sources 311

Index 325