He applied the “Page 99 Test” to his new book, Priceless: The Myth of Fair Value (and How to Take Advantage of It), and reported the following:
Priceless is about the hidden psychology of prices: how we map the desire to possess things onto numbers with dollar signs in front of them. As you might expect, hucksters of various stripes have always been concerned with this. More surprising is that some of the most important psychology of recent decades bears directly on this topic. In the book I trace how the science has influenced marketing, and vice-versa.Read an excerpt from Priceless, and view a brief video in which Poundstone discusses charm prices and the mysterious allure of "99 cents."
Page 99 of Priceless describes the concept of loss aversion. One of the psychologists I write about, Daniel Kahneman, said that he considered loss aversion his most important contribution to the theory of decision-making. In that sense, page 99 could be considered pivotal to the book’s argument. Loss aversion refers to the fact that losing money is not simply the mirror image of gaining money. There is an all-important asymmetry: Losses are more keenly felt. That is, losing $100 stings more than winning $100 delights. Prices are monetary losses that may be balanced by the gains of what we acquire. Loss aversion is thus central to many the tricks of today’s psychological marketers. Kahneman speculates that loss aversion also explains some of our deep-set cultural traditions:Kahneman observed that loss aversion ‘extends to the domain of moral intuitions, in which imposing losses and failing to share gains are evaluated quite differently.’ There’s a law against being a thief, not against being a tightwad. And while avarice makes the list of seven deadly sins, and charity the top three Christian virtues, the ten commandments forbids only stealing or coveting someone else’s wife and property. Charity is only a suggestion.
Visit William Poundstone's website and blog.
--Marshal Zeringue
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