Price and/or Value

Price and/or Value

I am sure you have heard this argument (or discussion) many times, so I will keep it short. People who make buying decisions simply based on price tags, know the price of everything and the value of nothing.

If you want to buy a pen you can pick one up for Rs.10 or spend Rs.15000 (on a Mont Blanc). The same is true for cars, computers, handbags, sunglasses, cat food, clothes and every other thing. Some people buy expensive coffee or wine, not necessarily because it tastes better but, because when they share it with their friends, they feel better about themselves. The value of showing off your riches to your guests comes at the price of getting an independent house in a  crowded city like Mumbai or Tokyo. The ‘feel good’ factor of using a paper bag instead of a plastic one, comes at a lower cost. In short, most people buy stuff based on the value. The ‘why’ sometimes means more than the ‘how much’.

There is another problem with the price. If you buy something because it is free with something (or something is free with it), do you really value it? The same thing is with a discount. Asking for discounts can be an endless negotiation, which usually ends in you buying something just because the price was low or saying “I really liked it, but he only gave me a 10% discount when I could have had 15%.” In both cases the object that you want to buy has lost value even before you buy it. You bought it as a trophy of the negotiation war that you won or gave it up as a loss. I doubt anyone would sell anything at a loss, so chances are the prices were inflated so you could bargain and feel like a winner. Moreover you ask for a discount, because you think someone else got one. If the seller is adamant that the price is fixed and if you want to bargain there is a shop down the road that sells it for a cheaper price, you tend to buy that thing for that price in that shop. You only ask for a discount and expect one, because you know someone else before you got one. Again, the value of the object is totally lost when these negotiations begin.

A kid never negotiates the price of a comic book or an action figure. It may be because he is a kid and does not know bargaining, but it is mostly because he really wants the book or toy. He saves up, works harder for more pocket money and eventually gets what he wants, at the set price. Then the toy becomes a trophy of a very different feeling, a feeling of working hard for what you want and getting it eventually. The kid not only becomes emotionally attached to it, but also keeps it forever for the lessons it has taught him. This kind of value can not be generated by haggling over the price or getting something duplicate or cheap.

The vicious circle – This is one example how one person being irrational can change the whole system. If everyone paid the price for everything without bargaining, the sellers would charge fair prices for everything. But because one (or a significant few) people went and asked for discounts and did not buy because the prices were not reduced, the sellers decided to play a trick. They inflated the prices, expecting people to bargain. Those who bargained bought the stuff at the “fair” price, those who did not bargain just increased the profits (a win-win for the seller not the buyer). I wonder what will happen if sellers start being more stubborn about charging fair prices and buyers only go to those sellers who do so?

— Mayuresh

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