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Individuals routinely overestimate what other consumers are willing to pay for goods, both real and imaginary, according to research from Shane Frederick, associate professor of marketing at Yale University.
Prof Frederick quizzed many of his MBA students, asking them what they would pay for an item and then what they thought someone else - even their neighbour at the next desk - would pay for the same item. He found for example that whilst the average MBA student was prepared to pay $27 for a DVD box set of the television series ‘The Sopranos’, those same students estimated that their peers would be prepared to pay $40 for the same goods.
The question held true for a range of items including teddy bears, iPhones and even imaginary goods such as a trip to the moon. However this bias disappeared when instead of paying money for the item students were asked to make a non-monetary payment instead, such as sharpening pencils.
Prof Frederick says the results indicate that many individuals appear to lack empathy when considering others’ feelings about spending money. And in turn this may mean that sellers may have a tendency to “set prices too high, or for difficulty in negotiations, when consumers and sellers have disparate valuations”.
The paper Overestimating how much others will pay for goods, is published in the Journal of Consumer Research.
● Feeling nostalgic about your school days, or perhaps you have been daydreaming about a childhood holiday? If so then you are far more likely to donate money to a good cause or to volunteer to work for a charity.
To try to discover whether or not it would be beneficial to incorporate nostalgia in charity appeals a group of academics carried out a series of studies in which they asked participants to think of pleasant events in their personal history. The participants were then presented with a variety of charity appeals and questioned on their willingness to donate and volunteer as well as measuring tangible charitable behaviour.
The authors of Nostalgia: the gift that keeps on giving published in the Journal of Consumer Research, Xinyue Zhou and Cong Feng, both of Sun Yat-Sen University, Tim Wildschut and Constantine Sedikides both of the University of Southampton and Kan Shi of the Chinese Academy of Sciences found that nostalgia had a positive effect on charitable behaviour.
“We have demonstrated that nostalgia augments empathy-based charitable intentions and behaviour. It is encouraging to learn that people can mine their nostalgic memories and derive from this a feeling of empathy for the suffering of others.”