This is called arbitrary coherence as the initial price is randomly chosen (arbitrary) and in turn affects future prices (coherence). Simply making someone think of a higher number makes people willing to pay treble the price. People whose last two digits were between 80-99 bid $27.91 dollars on average, while those whose last two digits were between 00-19 bid $8.64. Surely it’s ridiculous that simply thinking of a high number would make them bid higher, right? Wrong, that’s exactly what happens. After they answered, they would then actually bid for the bottle in a genuine auction. Although it seems strange, simply asking people to think of a low number (thereby anchoring them to a low number), makes them put a low value on a good and simply asking someone to think of a high number makes them more willingly to pay a higher price.Īriely tested this idea with an experiment where he asked people the final digits of their social security number (say 79) and asked if they would be willing to bid that price for a bottle of wine (in this case $79). If people are given a low anchor, they will bid low and vice versa. But what Ariely found was that the original anchor had a large impact on consumer’s later choices. So they take a price as an anchor or a starting point. So a consumer cannot decide if $5 is a good price without comparing it to others. You see people cannot decide things in absolute terms, rather they compare it to others (see yesterdays post on relativity). But by treating them like rare and exclusive commodities they became status symbols of the wealthy. The trick was that if the pearls had been treated like cheap jewellery sold in a discount store, that’s all they would have been. These black pearls which had been near worthless and sold only on obscure Polynesian islands were now worn by the most prosperous and famous of Manhattans elites. He took out large ads in glossy magazines presenting black pearls alongside diamonds and rubies. Instead he used his contacts to have the black pearls placed in the windows of a jewellery store on Fifth Avenue with a ridiculously high price tag. Consumers didn’t want black pearls so he should give up (only the government would be ignorant enough to force their will upon the market) or at least sell them at a discount price. At this point the neo-classical economist would argue that the market had spoken and should be respected. However, his efforts were a failure and he didn’t make a single sale. Assal agreed to sell them even though there was no market at the time for black pearls. As Tom Sawyer discovered, people pay a high price for what is hard to get regardless of its supply or demand curve.īack in the 1970s Salvador Assal (who had made a fortune through selling pearls) was approached by Jean-Claude Brouillet who had come across a collection of black pearls in Polynesia. Our first impressions have a large effect on later decisions so that too an extent, the market drives the consumer not the other way around. Instead consumers are subject to anchoring and arbitrary coherence which nudges them towards higher or lower prices. Results have implications for relational self-organization in the establishment of complex combined networks.In chapter 2 of Dan Ariely’s fantastic “ Predictably Irrational”, he discusses how supply and demand are not the independent forces that drive prices in the market as usually described. Results support the successful merger of the merged coherence class but not the merged non-coherence class. For the other participants, we attempted to establish a class merger between 2 members of each non-coherent class (Non-coherence condition king = pepper and queen = salt). In Phase 3, for half of the participants, we attempted to establish a class merger between 2 members of each coherent class (Coherence condition salt = pepper and king = queen). Separation of the classes within the geometric space was observed. In phase 2, we established 4, 4-member equivalence classes using a linear training arrangement, where each class included 3 arbitrary symbols and 1 known word. Non-coherence was observed between the arbitrary symbols and coherence between the known words (SALT=PEPPER, KING=QUEEN). In phase 1, we examined the pre-experimental relatedness of 12 arbitrary symbols and 4 known textual words (SALT, PEPPER, KING, QUEEN). Phases 1 and 2 were identical across the participants and Phase 3 differed based on group assignment. Distance was modelled geometrically using a multidimensional scaling procedure. We extended prior work on Relational Density Theory (Belisle & Dixon, 2020a,b) by evaluating the role of pre-experimental coherence among relational classes on the development of merged classes.
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