Obviously not right? But yet... it's a common fallacy, especially if we don't know much about the product.
I was reading up about this...
why people like to spend money on expensive things and believe that expensive things are good.
The answer is a mix of psychology and stupidity.
I'll copy and paste some stuff off the internet cos if I just post the link some people won't bother to click it.
(Cos usually I won't, I'll prefer the text to be in the page I'm in.)
All emphasis my own.
Daniel Goldman, Established a theory of the technosphere.
Answered Sep 12, 2015
There are a few reasons, and they relate to economics, poor use of logical reasoning, and psychology.
In general, quality does result in an increased price. Why? Because it generally takes more resources to make a quality product and because there are usually fewer quality products available. In addition, quality products are more useful, even if marginally so. This shifts both the demand and the demand curves making the equilibrium price higher.
So we have the following: in general, the higher the quality of an item, the higher the price. However, the reverse is not always true. People can charge whatever they want, so long as the market will bear it. People are using a logical fallacy known as affirming the consequent. They assume that, if A implies B, B must imply A as well. But that is not the case. However, because so many people make this fallacious assumption, the market tends to bear high prices for low quality products.
We often use past experiences to make predictions of the future. We form a model in our minds based on the past experiences we have made. If the model has been good to us (was useful in making predictions) we keep it. This is actually how science works. So for instance, suppose we have gone to a restaurant (call it Joe's) for many years. In the past, we tried many different restaurants and found that Joe's is the best. Now unfortunately Joe no longer runs Joe's, and the new manager just does not care about the place. Now in our mind, we have our model: Joe's has been better than other restaurants in the past, so it is still better.
But it is no longer the case. Now why don't we change our model? Well, maybe we stopped bothering with other restaurants, because Joe's was so good. Then we have no other evidence to contradict our model, and we keep it. Or maybe we do go to other restaurants, but we cannot shake our desire to think of Joe's as the best, so we continue to think of it as such, and pay the premium because of it.
Reason Three (Update)
Gaurav Sethi mentioned the idea of brands. I realized that, while part of the appeal of brands, and why they are so expensive is due to "reason two," that is because we have used the brand in the past and have gotten high quality results (there's our model again), it does not explain brand price in every case. So now I will add a third factor: consistency. This is an incredibly important form of non-price competition. Indeed, it may be more important than quality.
People don't like being disappointed. They like to know what they will get when they buy something. Because of this, people will often go to a brand rather than some no name company, even if the brand is of lower quality? Why? Because we know exactly what we'll get. I've seen restaurants commit suicide because their food was inconsistent. Meanwhile people flock to chains, in part, because they know exactly what they are going to get, each and every time they go to the restaurant, even if they are on the opposite side of the country.
Summary of first part
1) Good quality things take more resources to make, so they tend to be more expensive.
However, usually no one knows any better, so when people encounter an expensive item, they naturally assume it to be of better quality.
Since A=B many people assume B=A
Instead, it should be, if all tigers are cats, then... are all cats tigers?
2) People get used to a certain product and may be reluctant to change even after prices have increased.
You try a range of restaurants when you just started work. New income so you try many places. After awhile you realize a couple are worth to return to and you continuously frequent the place.
Even after the restaurant increases their price, you convince yourself that this restaurant is THE place to be. Cos the other restaurants aren't worth it.
Although new restaurants have popped up, you aren't willing to try them, cos you have concluded that this bunch of restaurants are the best.
You may have gotten used to having 10GB per month at $1 during the promo period, and you freely streamed videos on your phone. It's good, it's fast, you can watch anything on demand.
Then the promo is over and now the telco charges $50 per month... What do you do?
3) People don't like to be disappointed...
Seems really close to point 2.
I buy a Samsung phone, (actually I don't), and I conclude that a Samsung phone is not bad, so when I decide to buy a TV, I decide that, hey since Samsung makes good phones, they probably would make good TVs too... so I buy a Samsung TV and fridge, even though they cost more than other brands.
Cos I don't really want to buy other brands and get disappointed with a lousy product.
Another example in another article below...
In one study by The California Institute of Technology (Caltech) and Stanford University scholars, people not only rate the same wine more highly when they’re told it is more expensive, functional magnetic resonance imaging or functional MRI scans taken of their brains while they were drinking the wine suggest participants enjoyed the experience of drinking it more.
In another study using placebo pain killers, participants who took a fake pain-killing drug that they were told cost $2.50 per pill experienced more pain reduction during a series of shocks than participants who were told the pill cost only 10 cents.
What does this 2nd example mean?
Your brain is EASILY FOOLED. BUT... just by believing something is better, your brain can trick itself to believe it is better and the brain will experience it better.
This is the funky part. The brain actually feels happier when consuming something more expensive even though it's the same product.
BUT, I flip it around and further ask myself... if that's the case... then... could I trick my brain to love a cheap product as much as an expensive product?
Ok so what have we learnt here.
1) All tigers are cats, not all cats are tigers.
Most quality items are expensive, but not all expensive items are quality.
Typically, when I look at items, I perceive a happiness value and I judge the cost.
Then I estimate is this value worth the cost. If yes, then I buy it, if no then forget it. The quality itself doesn't really matter to me.
Article about this is here.
For me, I pretty much look at the value of the item.
2) We may get used to a particular product and be reluctant to change.
When I went to KL for our first few biz trips, we scouted out a good ramen restaurant.
The same chain can be found in Singapore and the ramens in Singapore are at an unaffordable $18-$30.
When we found it in KL, we could enjoy a good quality ramen at $8-$10.
We pretty enjoyed it.
Then I don't know why, as time went by, after a few months, the portions seems to get smaller, the pork slices got thinner. The price remained the same...
My wife didn't notice it, but I did... and I thought... ok the portion dropped by around 10%-15%... I'm not coming here anymore.
And we had to look for other places to eat.
Basically, the happiness / cost ratio dropped to an unacceptable level for me, even at the cheaper price.
I don't value ramen at a high happiness level so it's easy for ramen to drop out of my value equation.
The thing is... the world/country is very large, there are loads of good places to try, new products on promotion, etc... there's probably something of good value for me to try at anytime.
So when an item drops out of the happiness:cost ratio, I take it as an opportunity to try new things and explore all over again.
3) We may get used to a particular brand and be reluctant to change.
I don't really get affected by this cos I don't really go for brands.
It's a mixture of points 1 and 2.
It's like assuming if Samsung makes good phones, then they must make good other products.
Remember, if all tigers are cats... then...
And it's easy to not explore for new products and follow the brand, even if they don't make good products anymore... *COUGH Apple*
Apple products were state of the art. iPhones especially. But as the years went by, other phones caught up. But many people still swear by Apple, phones, Macs, tablets, etc...
(Apple fans will go totally crazy at me. Maybe Apple products are better, but are they of good value?)
This is like assuming and a chef who got his Michelin Stars by opening an Italian restaurant. Will open a successful Chinese restaurant selling dim sum just cos he has Michelin Stars.
But for me, once again, I go back to the same equation... if the happiness:cost ratio isn't worth it, then it's not worth it... Hey it's not that I don't buy expensive stuff... but if I do, I look for a good value out of it.
Read about my expensive hobby.
Even though it's expensive, I feel it's a relatively ok deal, cos I can eat 2 meals there.
4) Our brains are easily fooled.
So now that we know our brains can be fooled... I can potentially get even better value from my happiness:cost ratio...
Cos potentially... I can increase my happiness by just believing a product is better!
Most of the time, we don't know better.
Some people can tell the difference in wine... most can't.
Some people can tell the difference in coffee... most can't.
Some people can tell the difference in freshness of sashimi... most can't.
I'm not talking about bad stuff or rotting stuff. I'm saying like...
Sashimi found at a hotel buffet, vs Meidi-ya, vs Tsukichi Fish Market in Tokyo.
Many people won't be able to tell the difference.
Or for example, I buy a cheap macaroon, and put it in a La Duree box and give it to you as a gift...
Do you think you would bite into it and think that it's not a La Duree macaroon?
Most of us are not experts at a lot of things. We have a few interests and we focus on them.
If we don't eat macaroons regularly, we won't know what's good from another.
This is similar to when I consume expired food. I don't look at it as expired food. I just look at it as food.
A can of expired baked beans tastes exactly like a can of baked beans... as long as it's not sour/spoilt.
Or a handphone is just a handphone, most of us don't use our handphones for powerful functions, such that we need a phone with high specifications.
My happiness using a XiaoMi phone is the same as if someone gives me an iPhone...
(well I won't be happy with an iPhone actually, cos it's not a dual sim.)
I think the thing that wraps all of this points up is VALUE.
Since I have an equation to estimate my value of products...
Happiness / cost = Value...
As long as I feel something is of value, I may consider buying it. If it has low value, then I won't buy it.
I know some people who just buy something cos they want it. They don't assess value. Like my wife.
If the value drops due to a change in cost, then I'll just stop consuming and explore my other options.
The fun part is...
1) Happiness can be manipulated... If someone can be "truly happier" by consuming a more expensive thing, means the brain can be tricked to be happier just by believing it. So happiness can be increased for free.
2) After incorporating a freegan lifestyle... cost of many things have dropped to ZERO.
And guess what... it's hard to beat the value of free.
And yet, people in the freegan community are fussy, cos some people (aka me) will now only eat artisanal bread, cos between free artisanal bread vs free normal buns from neighbourhood bakeries, free artisanal breads are just better.
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