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Nov 21, 2010
Why are the comment editor and profanity filter so bad on this site? I understand that we pay nothing, but we do click through and get to view bad banner ads and occasional pop ups.
 
 
Nov 21, 2010
Don't underestimate the value of high prices. People often think they're getting something better when they're getting something they could have bought something better for less.

In the words of multi-billionaire Charlie Munger: Talking about economics, you get a very interesting phenomenon that I’ve seen over and over again in a long life. You’ve got two products; suppose they’re complex, technical products. Now you’d think, under the laws of economics, that if product A costs X, if product Y costs X minus something, it will sell better than if it sells at X plus something, but that’s not so. In many cases when you raise the price of the alternative products, it’ll get a larger market share than it would when you make it lower than your competitor’s product. That’s because the bell, a Pavlovian bell — I mean ordinarily there’s a correlation between price and value — then you have an information inefficiency. And so when you raise the price, the sales go up relative to your competitor. That happens again and again and again. It’s a pure Pavlovian phenomenon. You can say, “Well, the economists have figured this sort of thing out when they started talking about information inefficiencies,” but that was fairly late in economics that they found such an obvious thing. And, of course, most of them don’t ask what causes the information inefficiencies.
 
 
 
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