Priceless: how our unknowing irrationality confounds the price of everything

Poundstone’s explanations make sense of everything from flat-rate mobile phone pricing to packaged goods box-sizes to the insane complexity of those same “simple” flat-rate phone plans. He goes a long way to explaining the way that prices ending in 9s are oddly attractive, and to showing up the dirty tricks involved in rebate pricing and other tricks of the price-gun.

In some ways, Poundstone’s thesis — we make irrational purchases all the time — should be self-evident. After all, advertisers have spent a century extolling irrational cases for buying their products (what do cowboys have to do with Marlboros?), even as they argued to regulators that everyone who bought a harmful or overpriced product did so on the basis of their rational free will. But the pervasive game-theory story of rational actors acting rationally on the micro, macro and intermediate scales persists, and more importantly, it guides our policy-making and our economic thinking.

via Priceless: how our unknowing irrationality confounds the price of everything – Boing Boing.

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