Have you ever noticed yourself to buy an item you didn’t want or need but you happen to buy it anyways?
To be more specific have you ever been put into a state where you don’t need or want something but
- You ‘like’ it
- Everyone has it
- There something I said positive about it so
……. I’m going to purchase it.
Do you agree with any of the above? Yeah? but why do we do this? Why do we always make our minds to buy something for the reasons that are not even connected to our values or uses? Well the answer is simple because I am a human, you are a human.
As an individual I usually want to think of myself as a rational thinker and decision maker just like each and everyone of us assume we are. When we make a decision to buy, we make the a rational and informed evaluation of the product considering the factors of comparisons and the alternative choices we could have selected. And these choices we made and make comes from the satisfied purchases we made from our selections.
A minor change in our lives such as drinking a cup of coffee from one place to another alters our and variable conclusions. For say, one day you notice a different coffee shop (B) for your daily coffee rather than main coffee joint (A) and you decide to walk in. This new place has different prices and is more expensive and a completely different theme than your dominant shop, but instead of leaving empty handed you decide to further your decision on buying your main go to coffee. Meanwhile, after this step your interpretation of you previous step shows that you decision from before was finalized because that coffee place is your coffee style. Making you continue to revisit the shop constantly shop there. Causing you to make an initial decision with a stream of decisions which becomes a habit. The shop (B) outlook is to convince the customers that is was not like another shop including shop A by illusions. So now anything that was different than the new shop becomes irrelevant.
The way individuals value an object when a first piece of information offered to them and that information is the bias that is heavily relied on. What you pay for the same item that is old under two companies won’t be the same due to the anchor. What you knew before on the coffee shop you used to go to become irrelevant. Once decision making comes along. Anchoring come to role play to use that information and make a judgment that would benefit us under whatever position you are at.
Supply and Demand
The graph above shows us that at (300,1.00) the item reaches equilibrium. The equilibrium price is determined by both the supply and demand.
The basic foundation: Many factors determine the supply and demand called determinants. Supply determinants; number of sellers, seller’s expectations, cost of factors of production, technology and prices/profits of other goods. Demand determinants; number of buyers, buyer’s expectation, buyer’s income, buyer’s preferences/consumer taste and the price of other goods.
But the real question is can goods be overpriced? This is when there is a point above the equilibrium. For say, if there is a point at (1.25, 200) the good is not only over priced the supply of the good decreases. A good cannot be overpriced because it is dependant on the whole market price. So once the equilibrium changes there will be a shift in the market.
To clear things up a bit, if you decide to go shopping at any store, one of your favourite preferably, at a chilly day, you walk into a store with employers that assist you and one helps you out and suggest you to to take a look at a limited edition beautiful coat. When going into the store you might have not thought of specifically going for the new limited edition coat. But with the push of the seller you are tempted or even forced to look at it. And with the given factors you decide it’s a nice coat because it’s on sale, limited edition, and it’s the perfect season. You try it on and the buyer compliments you on how it’s the total fit and colour matched your complexion. And you buy it.
We can relate this decision to 6 factors which Dr. Robert Cialdini describes (https://www.influenceatwork.com/wp-content/uploads/2012/02/E_Brand_principles.pdf ) that make us decide what we decide:
- Liking; the influence of the people we think positive of.
- Reciprocity – we are ready to do something and or give something to someone who has already done to you.(At the offing, they paid me you compliment. That affects your decision, they gave you something, engaging the principle of reciprocity.. Now it creates the scene that it was time you to give something back: buying something from them perhaps to neutralize)
- Social Proof – we do thing that people like or do which make us feel better and when we think of it if everyone is doing something we tend to follow it assuming there’s good reasons for it.
- Consistency – behaviors and attitudes that are kept stable and constantly comminuted and are inclined to fulfil of.
- Scarcity – the thought of something being less of makes us want to have it more. (the coat was limited edition making the buyers expectation of the product to be sold out faster and for a limited time)
- Authority – looking for guidance for our decisions from someone who you think is more knowledge on the topic than you. (with the assistance of the seller in the tore it opens the door of some who has knowledge in the fashion industry may have a better view on what’s right with their input of opinions)
All in all, Are the prices we pay for goods rational? Can a good be overpriced? According to what we pay are rational compared to the market. So what makes us irrational overall? Even though the prices aren’t the irrational part it’s the decision maker’s. Being human it’s in our natural habitat to make imperfect decisions.