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86 of 92 people found the following review helpful
5.0 out of 5 stars Priceless lessons in pricing
I ordered this book after a good review in the Wall Street Journal.

From the title it sounds like a fairly dry book on pricing theories for a professional marketing audience.
In reality it is a very entertaining, well researched book about how prices are set from all kinds of businesses, how consumers react to them - and why.

Having worked in...
Published on January 10, 2010 by Oliver Fritsch

versus
106 of 115 people found the following review helpful
3.0 out of 5 stars Pretty good, though not quite what I expected
I bought this book after hearing the author interviewed on NPR. In the brief two-minute (or thereabouts) interview the author mentioned some factoids that sounded fascinating and whetted my appetite for more.

Now having read the book, I have to say that, although I learned things about the human mind I never knew before, I was disappointed in how dry the book...
Published on January 25, 2010 by Michele


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86 of 92 people found the following review helpful
5.0 out of 5 stars Priceless lessons in pricing, January 10, 2010
By 
Oliver Fritsch (Amerang, Germany) - See all my reviews
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This review is from: Priceless: The Myth of Fair Value (and How to Take Advantage of It) (Hardcover)
I ordered this book after a good review in the Wall Street Journal.

From the title it sounds like a fairly dry book on pricing theories for a professional marketing audience.
In reality it is a very entertaining, well researched book about how prices are set from all kinds of businesses, how consumers react to them - and why.

Having worked in marketing and as an entrepreneur for 20 years, I have come across some of the stories quoted in the book already. However, I was not aware, that a German professor (Hermann Simon) runs the biggest pricing consulting firm in the world, that restaurant menus are better designed without leading dots before the price (otherwise they guide the eye to the lowest priced item) or that supermarkets yield a $2 higher average shopping cart revenue if the path through the market goes counterclockwise instead of clockwise.

It will take some work to extract pricing lessons for your own business (you actually have to READ the book first!) but it is pleasant enough!

Oliver Fritsch
Cendesic Marketing
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106 of 115 people found the following review helpful
3.0 out of 5 stars Pretty good, though not quite what I expected, January 25, 2010
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This review is from: Priceless: The Myth of Fair Value (and How to Take Advantage of It) (Hardcover)
I bought this book after hearing the author interviewed on NPR. In the brief two-minute (or thereabouts) interview the author mentioned some factoids that sounded fascinating and whetted my appetite for more.

Now having read the book, I have to say that, although I learned things about the human mind I never knew before, I was disappointed in how dry the book was overall. The first half was devoted to the history of psychophysics, and numerous experiments conducted over the last hundred or so years. These experiments have served to establish just how quirky, irrational and suggestible the human mind is with regards to numbers, and pretty much debunk the established notion among economists that humans behave rationally when it comes to numbers, always making decisions that will best benefit themselves (the mythical Homo Economicus). Although these experiments were all new and surprising to me, reading about them felt like reading a college textbook. Not exactly my idea of pleasure reading!!

Just about exactly halfway through the book, Poundstone gets more interesting. This is when he starts citing real-world examples of how savvy businesses take advantage of the mind's susceptibility to numbers (often using the service of "price consultants"), all with the intent of getting clueless customers to part with more of their hard-earned money. This part of the book was truly fascinating, as he talked about how super-pricey designer boutiques arrange merchandise in their stores, how restaurants design their menus, and how new and unknown artists price their work to gain attention.

Alas, this part of the book was all too short, as Poundstone soon lapsed again into talking about more experiments.

I did learn some intriguing things about how my own mind works. I had previously thought I was impervious to the influence of advertisers and marketers. Alas, I now realize that when it comes to the murky, arbitrary realm of prices, my brain is as suggestible as anyone else's.

My conclusion: the fascinating factoids mentioned in the two-minute NPR interview were THE entire interesting part of the book -- the rest of it is somewhat tedious and academic. I was pleased with the book overall and would recommend it, albeit only to someone else who is pretty nerdish and interested in this kind of thing. This book is definitely not for everyone.
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77 of 86 people found the following review helpful
5.0 out of 5 stars Fun-to-read, entertaining, educational, topical, February 12, 2010
By 
rbnn (Berkeley, CA United States) - See all my reviews
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This review is from: Priceless: The Myth of Fair Value (and How to Take Advantage of It) (Hardcover)
There is an intriguing irony (if not synchronicity) to my purchase of this book.

The story is, I had been trying to buy this book for a few weeks from Amazon.

But I couldn't (without incurring shipping fees), because Amazon had delisted the hardcover book from their catalog. Why would Amazon refuse to sell a new book by a prominent author? Well, ostensibly it was "retaliation" for the book publisher's (Macmillan's) request that Amazon charge higher prices for Kindle books published by Macmillan. Leaving aside the question of why users without a Kindle should have their ordinary book access restricted because of a pricing dispute over a product they do not want, the imbroglio raises two salient issues about pricing:

(1) Why is $9.99 (what Amazon wanted to charge) the "right" price for a Kindle e-book? Why not $12.00 or $14.00 (which Macmillan wanted to charge)? If you read some of the Kindle users' blogs, they are adamant that $9.99 is the right price, and that $14.00 is too high - but how do they know?

(2) Why would Macmillan care if Amazon charges too little for Kindle pricing anyway? It doesn't directly affect their profits (Amazon makes up the difference).

Well, as it turns out, the underlying framework behind both of these questions is carefully discussed and elucidated in this very book!

As to issue (1), Poundstone argues that much of what we think of as "fair" pricing is nothing more than a collection of cognitive fallacies and biases. The most important of these fallacies are the contrast effect (pricing taking on significance from neighboring prices) and the anchoring effect (we are drawn to a particular number). Poundstone illustrates these effects, and the process by which their importance was recognized first in the literature and then in consumer practice, through a long series of vignettes that recapitulate the genesis and development of pricing theory, behavioral economics, and psychological decision theory. So as it issue (1), Poundstone would probably argue that many of the reasons people give to support $9.99 as being more "fair" than $14.00 are illusory - that pricing is far more fluid and idiosyncratic than most people appreciate.

As to (2), Poundstone might argue that Macmillan is worried about the contrast effect. Macmillan would be concerned that even to a person who does not have nor intend ever to acquire a Kindle, the proximity of the $9.99 would make its hardback price of say $18.00 seem higher than it actually was to a consumer. So this book lends support to Macmillan's position as to issue (2).

Now, let me briefly get to the meat of the book.

The book is structured along the lines of that distinctive modern subgenre of popular economics books in which anecdote and biography are interwoven and are equal partners with theory and experiment. Careful measurements by colorful character, in the stories of these works, gradually overturns entrenched orthodoxy, first in a small-scale and then in the large. Popular exponents of this style include Malcolm Gladwell, whose Tipping Point, Blink, and What the Dog Saw are canonical examples; Michael Lewis, whose Money Ball described the impact of statistics on baseball; Thomas Bass, whose Eudaemonic Pie and The Predictors foreshadowed the more modern style and which treated the impact of statistics and nonlinear modelling (chaos theory) respectively; Sam Savage, whose Flaw of Averages is a good introduction to statistics in this style; and of course Steven Levitt with his Freakonomics series.

This book is a worthy and interesting addition to the genre. Of the many interesting anecdotes, my favorite was probably Eskildsen and the World Trade Center, and how Las Vegas turned out to play a major role in the development of psychology. The cast of characters, including ex-Israeli soldiers among others, was very entertaining. And the theory, although of course subject to some carping (no confidence factors in many of the studies reported, for example) highlighted the key points clearly and gave the reader clear paths for further knowledge.

Thus, I would recommend this book as a good introduction not only to pricing but also to behavioral economics and human decision-making generally.
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18 of 22 people found the following review helpful
2.0 out of 5 stars Googled together?, May 4, 2010
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This review is from: Priceless: The Myth of Fair Value (and How to Take Advantage of It) (Hardcover)
From "The recursive Universe" (1984) till "Fortune's Formula" (2005), I am a longtime mostly happy reader of Poundstone. This time, I'm not.
The present book is a loose collection of newspaper like items, 57 in total and grouped into four parts. Nowhere in the book I found an explanation
what the parts stand for. Nor is there any introduction explaining the structure of the book or its goals. Neither is there any conclusion at the end.
Googling the internet on Kahneman, Tversky and Thaler would probably catch 80 percent of the contents, if not more. But Poundstone did that for me.
Is it worth its price? According to Max Bazerman, Professor of Business Administration, Harvard Business School on the backflap:
"If you can get this book for under $100, grab it! After you read it, you will better understand why the price you paid felt like a bargain".
I got the book for $17.81 (march 2010). Given the set anchor and the priceless project theory, I should feel happy. But I don't.
Which could explain why its current (may 2010) price is under $15.

You can get a free flavour of the anecdotical topics covered in the book at: [...]
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7 of 8 people found the following review helpful
5.0 out of 5 stars Well wrtitten, entertaining, and informative, April 21, 2010
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This review is from: Priceless: The Myth of Fair Value (and How to Take Advantage of It) (Hardcover)
I found the book to be well written, entertaining enough that i finished its 336pp in three evenings of enjoyable reading. I read some of the other less than stellar reviews and would wholeheartedly disagree with those critics on the value of this book. It simply proposes to tell one of how marketers use various gimmicks to control prices, and some of these are in subliminal manners. I was never under the guise that this book was meant to be considered a course in price theory, which would be a junior level course in a pursuit of a bachelors degree with a major in economics, but some readers might have thought that reading this one book would prepare them to challenge Greenspan or Summers on economic theory. We all have our biases and prejudices in all areas of life, and PRICELESS helps to explain how and why we may feel in a certain way about the price of Gucci bag, a pair of Jimmy Choos, and etc. The evidence provided is primarily anecdotal and not meant to be an all encompassing erudite study in economics. If you want to read a very entertaining book on how many large marketers decide to set what they consider to be their optimal prices for their various products then add this book to your reading list. If you want to become an economic expert, I would suggest enrolling in an institution of higher learning and expecting to take four years of concentrated study in that area before you even think of grad school. I liked this book enough that I bought additional copies for each of my kids, so that should say how much I liked it.
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4 of 4 people found the following review helpful
5.0 out of 5 stars This book's main lesson: the book is probably not worth what you pay for it., July 6, 2012
Some nerve asking 27 bucks for this book. Actually it's $26.99. Oh wait, Amazon tells me that it's now $10.80. My god! I could *save* $16.19 just by buying this book. I'll buy a million and make a fortune! Wait... I'm confused. And so are you.

I thought this book was a brilliant and critical instruction manual to one of the most important aspects of modern life. First, everything you learned in economics class is demonstrated to be flagrantly wrong. Prices do not reflect some kind of supply/demand curve intersection. Prices are more random. More magical. More predatory. And it is the human brain that is the exploited weakness.

Poundstone's writing, to me, is quite good. I found him literate and well-organized. The pacing is good and the research is thorough. Indeed, my biggest complaint about the book is that I have already read about many of the interesting studies he cites. This does not diminish the effect since everything he cites is a bona fide interesting case.

As I read this book I kept thinking, ok I'm smarter than this, I'm not part of this irrationality. But the inescapable conclusion is that you are. Prices are hard to deal with sensibly using all available information. Our minds are designed for short cut heuristics that mostly work, but which can be exploited. You can minimize the problem but vigilance is required.

My hope is that the author and publisher didn't waste the delicious opportunity to play some price games with the book itself. What would the difference be between a market with a $40 cover price discounted to $10 vs. a market where the book was just priced $10? Can the author prove some money was earned by choosing a better cover illustration? Etc. I hope to see a new chapter in the next edition! Which I will get from the same supplier as I got this edition, the library.
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5 of 6 people found the following review helpful
5.0 out of 5 stars Another Book Review by the Aleph Blog, February 12, 2011
By 
David Merkel "Aleph Blog" (Ellicott City, MD United States) - See all my reviews
(REAL NAME)   
I really enjoyed the book Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street (review forthcoming), so when I learned the William Poundstone had written a new book, I went out and bought it.

This book, Priceless: The Myth of Fair Value (and How to Take Advantage of It), covers rationality in decision making, and how markets and marketers take advantage of the deficiencies in rationality in average people.

There are many in the investment community that admire behavioral finance, and many who say that it might be true, but where are the big profits to be made from it?

This book doesn't cover behavioral finance per se, but it does cover its analogue in pricing and marketing. In a negotiation, the first person to put a price on the table tends to push the final price agreed to closer to his price. Leaving aside no-haggle dealerships, why do car dealers post high prices for vehicles? Because only a minority does the research to understand what the minimum price is that a dealer will accept. The rest pay more, often a lot more. Personally, I do a lot of research before I buy a car, and it helps me spot dealer errors in pricing.

The book is replete with examples of how there is no "fair" way to price things out. What are the proper damages for a jury settlement? The attorney for the plaintiff is incented to come up with the highest believable amount for the jury, because they will render a verdict less than that. Make the ceiling as high as possible, and the plaintiff will get more.

We call placing the first price on the table "anchoring," because it pulls the final result toward itself. The book is filled with experiments dealing with anchoring.

The book also spends a lot of time on the "ultimatum game," where a person gets $10, and must offer some of it to a second person, but if the second person turns him down, the first person gets nothing. The main lesson here is that pride is stronger than greed. Yes, it can be construed as a question of fairness, but when someone gives up money to deny money to someone else, it is not fairness but envy. Why pay to make someone else worse off? To teach him a lesson? What an expensive lesson.

Much of this book was a walk down memory lane for me. I discovered Kahneman and Tversky in the Fall of 1982, and I found their ideas to be more cogent than much of the "individuals maximize utility" cant that was commonly heard from most professors teaching microeconomics. People are far more complex than homo oeconomicus. Small surprise that most tests of microeconomics as a system are not confirmed by the data.

Kahneman and Tversky showed via a wide array of examples that the decisions people make are affected by the way they are presented to them. People can be manipulated in limited ways in order to affect the decisions that they make.

The book deals with many marketing tricks, particularly the powerful word, "free," and how it dupes people into buying something to get something for free. For another example, why companies sell really expensive items that few will want, because people will buy the next most expensive item with greater probability, versus less expensive items of the same class.

Other topics covered include:

The virtue of complex billing
Why nines work well in pricing.
Alcohol, and its value in bargaining
How changing symbols can affect willingness to deal.
Why to keep a `neutral' friend with you in bargaining.
And much more.
I really enjoyed the book. It won't be of as much value to investors, but it will be of great value to consumers. Learn how marketers trick you.

Who would benefit from this book

Most people would benefit from the book. We all need to understand our thinking biases better, so that we make smarter purchases, and avoid wasting money. If the ideas of the book are applied well, you could pay for the book many times over in a year.
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9 of 12 people found the following review helpful
4.0 out of 5 stars Interesting Tidbits about Pricing., February 21, 2010
This review is from: Priceless: The Myth of Fair Value (and How to Take Advantage of It) (Hardcover)
The title tells it all -- this book is Priceless.

Disturbing, jaw-dropping but priceless. It is an expose on how we are being ripped off every day in virtually every business endeavor we undertake. Really some amazing data here.

When it comes to the price we should pay, we as a nation are painfully gullible. Thus we are at the complete mercy of advertisers, salespersons and marketers, hucksters all. They decide the prices of the items we buy and it has no relationship to quality or rationality.

Most of us don't even realize we are being manipulated. Many of us think we are pretty savvy; we compare prices, shop the sales, really believe things are discounted. We think we get a good deal. Dream on slumbering giants.

The author puts it succinctly "the numbers that make our world go around are not so solid, immutable, and logically grounded as they appear. In the new psychology of price, values are slippery and contingent, as fluid as the reflections in a fun-house mirror."

Poundstone introduces us the concept of "anchoring." It is widely practiced. A retailer offers an over priced item which he has no intention of selling. But it draws customers in. They ultimately settle on a lower priced model. It's not bait and switch but it is as unethical. An example he presents is an expensive, $429, breadmaker Williams-Sonoma offered. It hardly sold. But its $279 model flew off the shelves. People thought they were getting a bargain. Actually they were being fleeced.

Poundstone explains the same is true in the more you ask the more you get philosophy. It is certainly prevalent in the law. Sue for more than is proper, and you'll get more.

Teaser rates, rebate coupons and late-night infomercials have all claimed victims among us. Reading this book will help us fight back or at least bring a smile to our face when we realize we have been snookered -- once again.
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2 of 2 people found the following review helpful
5.0 out of 5 stars Extremely helpful and enjoyable, April 10, 2014
By 
Elenor (near Atlanta GA) - See all my reviews
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I inherited a small manufacturing company when my husband died in 2011. I've kept it going, and have impressed all my distributors and customers with the excellent upgrades and changes I have made to our products. I'm still climbing a VERY steep learning curve -- I've run an editing company (services) years ago, but never a products company... As a woman, I struggle with pricing and with being "fair" -- which means I sometimes don't charge a fee that I should, or -- as now -- when I should raise prices (to account for all the upgrades I've made), but "feel bad" about it...

This book -- despite others' complaints that it is disjointed -- provided me with 'bite-sized,' easy to follow, clear and useful information and examples to guide me in understanding how the company pricing should be managed. I am VERY grateful to William Poundstone for gathering up all this amazing info into one place, and making it a pleasurable read too! I finished it recently, and am beginning again at the first page -- having now gotten a good grounding, I will pull out my actionable steps!

I don't KNOW for sure that it helped, but I'll bet it did: I submitted with my application to re-fi my house the current Zillow, Trulia, and USAA "home values" -- setting an anchor high enough (I hoped) that the 'credit committee' would take those prices as the anchor for considering the house value. Then I also printed it out, with the list of things done in the remodel done before my husband's death (which the crappy appraiser in 2012 had ignored; he had said no remodels had been done in 15 years -- which wiped out the $70k we spent in 2008!! and appraised the house way way way low!)( and gave that list -- of prices and remodel changes -- to the appraiser, hoping the 'anchors' would lead him to start high -- and stay high -- so my loan-to-value would allow approval. Seems to have worked!

REALLY found this book useful!
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2 of 2 people found the following review helpful
5.0 out of 5 stars Explains how the "Fair Price" is determined, and why this price is relative, not absolute., August 22, 2010
By 
Steven Chambers (Las Vegas, NV USA) - See all my reviews
(REAL NAME)   
This review is from: Priceless: The Myth of Fair Value (and How to Take Advantage of It) (Hardcover)
I found this book to be an entertaining and well-researched romp through the strategy of pricing and human decision-making. Here is the basic lesson of the book - Prices are not an absolute and the perception of a "fair price" is subject to manipulation and positioning. By using the right techniques and taking advantage of certain cognitive fallacies and biases that we all have just about any price for an item can be made to look fair. How to accomplish this is explained throughout the book.

First off, there is no such thing as a "fair price". Pricing is based on our perception about what is fair and our subjective idea of a particular item's value. This perception can be manipulated, unknown to us, by factors such as anchoring (very powerful), priming and framing, which are the three most powerful tools in the persuasive toolbox.

I love learning how the mind works and how we act and make decisions so for me this was a fun and informative book to read. I enjoyed reading the book from cover to cover, not only for the subject matter, but also because I like the emphasis on scientific studies and practical experimentation that backed up the information in the book. While I like my information delivered in this manner I can see how others might find it dry and maybe a little too academic. That is something to be considered before picking up this book.

As mentioned previously, the three primary persuasive techniques covered in depth were priming, framing and anchoring, with most of the studies exploring these these subjects being based on the Ultimatum Game. If you don't know or are curious about what the Ultimatum Game is, including it's many variations, then this is the book to read. He covers just about every variation of playing the game that exists. I found the knowledge imparted from these studies to be very insightful and valuable.

The information in this book was so valuable to me that it's one of the few books I've read with a highlighter and notepad at the ready so I could capture the various strategies for use in my business. Just how powerful are the techniques of anchoring, priming and framing? More than you would think. I've taken some of the things I learned in the book and use it in my daily business life. I am now more aware of the effect priming, framing and anchoring have on people, myself included, when it comes to our feelings about how things should be priced.

All pricing is based on psychology, something about which most of us have a limited understanding. We tend focus way too much on the cost in dollars of an item and not enough on the value of a particular item to us personally. Interlaced with our perception of value is our concern with not being "taken advantage of" or looking out of sync with the group. Prices are best viewed relative to other prices and not solely in and of themselves. It is rare that a price stands alone because that gives us nothing to compare to it. Provide that comparison, obviously positioned to be favorable to ourselves, and we can make a price appear however we want it to appear, as a great bargain or overly expensive.

Everyone should know the techniques used to manipulate our perception of price, whether on the consumer side or as the business owner. We are all being influenced and persuaded unconsciously and unknowingly all the time. Knowledge of how this is done is the best way to be sure you get the best value for yourself in any consumer encounter.
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Priceless: The Myth of Fair Value (and How to Take Advantage of It)
Priceless: The Myth of Fair Value (and How to Take Advantage of It) by William Poundstone (Hardcover - January 5, 2010)
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