Satisfaction comes partly from the perceived quality of the deal rather than from the good itself.
Thaler's 1983 concept. It is why struck-through reference prices work, and why a fairly-priced item can disappoint next to an identical item marked as discounted.
In practice
- A shopper buys a coat reduced from £300 to £120 and would not have bought the same coat priced at £120.
- A season ticket bought in the January sale feels like a win every month; the identical fare paid weekly feels like an imposition.
- Standing
- Why reference prices and struck-through prices work.
- Subject
- Economics & Incentives
- Essay
- The theories behind every argument about money